National Review v. Alice Rivlin on Fiscal Policy

With the CBO projecting gross Federal debt to rise from its $6760 billion level at the end of 2003 to $9920 billion level by the end of 2008 (an average annual increase of $632 billion a year), the comment from Johan Goldberg at The Corner on National Review Online “Why have a silly battle to define the ‘heart and soul’ of the GOP as either tax cuts or spending cuts? Why not define it as both tax cuts and spending cuts?” strikes me as the fuzzy math one gets from his economic colleagues. Kevin Drum has already noted that the politics of the new GOP are for more spending not less.

But if Mr. Goldberg is confused on the numbers, let me suggest Alice Rivlin and Isabel Sawhill’s “Restoring Fiscal Sanity: How to Balance the Budget” who lay out three plans: “The report suggests three ways to balance the budget while simultaneously making room for new priorities. One approach primarily involves spending cuts and smaller government, another relies more heavily on tax increases to support an activist government, and the third suggests a balanced mix of spending cuts and tax increases along with a reallocation of government priorities”.

They call the first plan, the “smaller government plan”, which essentially says let a cheap conservative like Phil Graham (I say this was a lot of respect for the fiscally responsible Senator Graham) set spending and then note that even with significant spending cuts, tax increases will be necessary. They call the second plan the “larger government plan”, which likely means spend like George W. Bush and tax like Howard Dean would. Of course, Governor Dean has rightfully criticized the spending increases under President Bush and is simply honest about the long-term tax consequences.

But let me have Rivlin and Sawhill describe their third alternative: “And the final we call the better government plan. It keeps government about the same size as it is now as a share of the economy, but it reallocates spending in ways that the authors of this book think would make a government more effective and, thus, a better government.” Read the details and fiscal responsibility will require more tax revenues not less under any of these plans.

In terms of Senator Kerry’s quest to be the next President, keeping his comittment to maintain the tax cuts for the middle class will mean that Roger Altman & Company will have a very difficult task. Mr. Altman and his colleagues in 1993 did an admirable job for President Clinton in 1993 with no support from the GOP, but the task in 2005 will be even more difficult. I suspect Senators McCain and Voinovich and maybe a few other Republican Senators will assist this time. But are there any fiscally responsible Republicans in the House? And better yet – do we liberal Democrats have any suggestions for reducing government spending?