Category Archives: American Thought

Who Do You Trust?

Daniel Henninger: Who Do You Trust? – WSJ.com.

D Henninger is usually spot on – and he is in this article.

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They say America is politically divided. But in the days following the appearance of Paul Ryan’s GOP budget in the firmament last week, the planets of political debate finally aligned. We were all agreed: The issues before us were the future of federal spending, the future of federal entitlement programs, and the future of federal taxes. The terms set, the debate would proceed—after the president of the United States addressed the subject in a major speech on the nation’s fiscal future.

Instead, Barack Obama at George Washington University poisoned the well. Where is Rahm Emanuel when we need him? Mr. Emanuel was Little Lord Fauntleroy compared to the tone of discourse Bill Daley loosed on the body politic. What Mr. Obama delivered yesterday was a campaign speech, and a petty rank one at that.

After Republicans won the House in November, the question was whether a standard-issue politician named John Boehner had it in him to rise to the responsibility of being Speaker of the House. There’s near universal agreement he has.

As if in some reverse force-field, Barack Obama, who so impressed the nation with his demeanor and stature as presidential candidate in 2008, has suddenly decided to engage the great fiscal debate at the level of a vice-presidential attack dog. Spiro Agnew, the presidency has finally caught up with you.

The expectation in Washington was that the president would offer a kind of “white paper” of his views on spending and deficits. What he delivered instead was an invitation to the Gunfight at the OK Corral. So be it. And maybe just as well.

In all the pages Paul Ryan produced for his budget, its most important five words were: “This is a defining moment.” The president proved that yesterday.

The question voters are going to have to come to grips with between now and November 2012 is, Who do they trust to take the U.S. forward into the 21st century?

After spending about a decade getting a feel for the realities of a new century—itself defined by a constant state of financial and physical vulnerability—Americans next year have to decide which of their institutions are most likely to take the nation forward to a successful result. Is it Democrats or Republicans, Washington or the states, the public sector or private sector?

The Ryan-GOP budget’s core goal is to pare spending as a percentage of GDP to 20%. Mr. Obama, referring obliquely yesterday to his two successive $3-trillion-plus budgets as “emergency steps,” has reset federal spending at 24% of GDP.

With annual national output now at $14 trillion, within those four points of GDP are trillions of dollars of public spending and taxation decisions. Inside those four points, you can define and decide the nation’s future.

At 24%, you are entrusting the trillions to Washington, the Democratic Party and the public sector—a triumvirate Mr. Obama yesterday referred to as “we,” as in, “we will not abandon the fundamental commitment this country has kept for generations.”

At 20%, you’re entrusting that wealth to someone else. That someone else is either the private sector or the 50 separate states. This would expand the meaning of “we.”

The Ryan Medicaid proposal illuminates the choice. He’d allow individual states to decide how to spend their share of federal Medicaid trillions. Nearly everyone agrees that Medicaid needs rehab. It’s destroying state budgets, doctors shun it, and the poor are driven to the mayhem of emergency rooms for routine care.

Someone has to decide how to spend those Medicaid trillions and repair the program. That someone will continue to be whoever shows up for work every day at the offices of HHS’s Centers for Medicare and Medicaid Services at 200 Independence Ave. in Washington—aka “we.” Or it will be 50 different teams assigned to figure out a fix appropriate to their states. The left says that “they,” the states, would throw the poor into the streets. This is 2011. Either you believe that the states are stuck in 1933, or you don’t.

The central trust issue is taxes. The Ryan budget proposes a maximum tax rate of 25% for individuals and corporations. The president dragged the “millionaires and billionaires” onto the stage yesterday for another round of pistol-whipping (three mentions of the shameless duo).

It may be that Mr. Obama is obsessed by this subject, but that misses what he really wants. Since FDR, the Democrats (and Washington) have depended on maintaining a tax system with no identifiable ceiling. Taxes can always “rise.” Simpson-Bowles or anything likely to emerge from Rep. Dave Camp’s Ways and Means Committee would formalize a rate ceiling. Reviling “the wealthiest” is most of all a tactic to prevent what would be a Democratic catastrophe. Simpson-Bowles would reorder economic and political power away from Washington and out toward the states and their millions of non-millionaire citizens.

Simpson-Bowles was clear about that. Paul Ryan was explicit. So yesterday was Barack Obama. “We,” Washington, gotta have that money.

It was a useful speech. A defining moment.

Write to henninger@wsj.com

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The Tea Party’s First Victory

Review & Outlook: The Tea Party’s First Victory – WSJ.com.

This is getting to be a habit. President Obama ferociously resists tax cuts, trade agreements and spending cuts—right up to the moment he strikes a deal with Republicans and hails the tax cuts, trade agreements and spending cuts as his idea. What a difference an election makes.

This is the larger political meaning of Friday’s last minute budget deal for fiscal 2011 that averted a government shutdown. Mr. Obama has now agreed to a pair of tax cut and spending deals that repudiate his core economic philosophy and his agenda of the last two years—and has then hailed both as great achievements. Republicans in Washington have reversed the nation’s fiscal debate and are slowly repairing the harm done since the Nancy Pelosi Congress began to set the direction of government in 2007.

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Yes, we know, $39 billion in spending cuts for 2011 is less than the $61 billion passed by the House and shrinks the overall federal budget by only a little more than 1%. The compromise also doesn’t repeal ObamaCare, kill the EPA’s anticarbon rules, defund Planned Parenthood, reform the entitlement state, or part the Red Sea.

On the other hand, the Obama-Pelosi Leviathan wasn’t built in a day, and it won’t be cut down to size in one budget. Especially not in a fiscal year that only has six months left and with Democrats running the Senate and White House. Friday’s deal cuts more spending in any single year than we can remember, $78 billion more than President Obama first proposed. Domestic discretionary spending grew by 6% in 2008, 11% in 2009 and 14% in 2010, but this year will fall by 4%. That’s no small reversal.

The budget does this while holding the line against defense cuts that Democrats wanted and restoring the school voucher program for Washington, D.C. for thousands of poor children. Tom DeLay—the talk radio hero when he ran the House—never passed a budget close to this good.

The political gains are also considerable. When Mr. Obama introduced his 2012 budget in February, he proposed more spending on his priorities in return for essentially no cuts. Two months later, the debate is entirely about how much spending to cut and which part of government to reform. Democrats were forced to play defense nearly across the board, obliged to defend programs (National Public Radio) that were once thought to be untouchable shrines of modern liberalism.

Republicans also showed they are able to make the compromises required to govern. We realize that “governing” can often be an excuse for incumbent self-interest. But this early show of political maturity will demonstrate to independents that the freshmen and tea party Republicans they elected in November aren’t the yahoos of media lore. A government shutdown over a spending difference of $7 billion and some policy riders would have made the GOP look reckless for little return.

Now the battle moves to the debt ceiling increase and Paul Ryan’s new 2012 budget later this year, and there are lessons from this fight to keep in mind. One is to focus on spending and budget issues, not extraneous policy fights. Republicans have the advantage when they are talking about the overall level of spending and ways to control it. They lose that edge when the debate veers off into a battle over social issues.

We certainly agree that, amid a $1.5 trillion deficit, taxpayer funding for Planned Parenthood is preposterous. Let George Soros or Peter Lewis spend their private fortunes to support the group’s abortion counseling. But Mr. Boehner was wise to drop the provision on Friday rather than let Mr. Obama portray a shutdown as a fight over abortion rights. If Republicans want to win this fight in the coming months, they need to convince voters that Planned Parenthood funding is a low fiscal priority, not make it seem as if they want to use the budget to stage a cultural brawl.

This point is especially crucial in the looming showdown over increasing the debt limit. Mr. Obama will marshal a parade of Wall Street and Federal Reserve worthies predicting Armageddon if the debt limit isn’t raised as early as mid-May. Republicans will play into his hands of they seek to load up any debt limit increase with policies unrelated to spending and debt reduction.

The best advice we’ve heard is from former Senator Phil Gramm, who says Republicans should agree that families and nations should always honor their debts. But in doing so they should also make sure they won’t pile up new debt. For a family, that means cutting up the credit cards. For Congress, it means passing budget reforms that impose hard and enforceable limits on new spending and debt.

We are not talking here about that hardy perennial, a balanced budget amendment to the Constitution, that would easily become a lever for Democrats to push for higher taxes. Far better would be statutory limits on spending increases and debt as a share of GDP, sequesters that automatically cut spending if Congress exceeds those limits, supermajority rules for replacing those limits, and revisions of the budget baseline so that each year’s budget begins at last year’s spending levels, not with automatic increases.

This is the kind of reform the public will understand is directly related to the debt limit, and one that Senate Democrats and Mr. Obama will find hard to oppose. Republicans should waste no time starting to explain their debt-limit terms, so voters also understand the GOP isn’t toying with default as a political ploy.

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One of the ironies of Friday’s budget deal is that it is being criticized both by Ms. Pelosi and some conservative Republicans. We can understand Ms. Pelosi’s angst. But conservatives are misguided if they think they could have done much better than Mr. Boehner, or that a shutdown would have helped their cause. Republicans need to stay united for the bigger fights to come this year, and for now they and the tea party can take credit for spending cuts that even Mr. Obama feels politically obliged to sell as historic.

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