Monday, March 07, 2005

I Hate To Say I Told You So, But...

No, I mean I really hate to say I told you so, but according to a recent quote from Alan Greenspan (via Billmon with a pair of hat tips to praktike and jonny), I came pretty close to telling you exactly what Greenspan and his allies would say (verbatim). Here is Greenspan's gloom and doom spin on the future viability of our entitlement programs.

"The one certainty is that the resolution of the nation's unprecedented demographic challenge will require hard choices and that the future performance of the economy will depend on those choices," Greenspan said. [emphasis added]
Greenspan almost literally took the words out of my mouth (words that I predicted would one day be uttered from his own). As far back as August (twice), and more recently in November and February, I had predicted the GOP's tactic of employing the "tough choices" and "hard choices" verbal constructs to leverage the mounting fiscal crisis as a means of undoing the continuation of Social Security and Medicare.

We will be forced to make "tough choices" the pundits will repeat ad nauseum.
I said that back in November.

Now Greenspan comes along and validates my earlier skepticism, and backs up my prognosticating acumen. Here is the broader background of what I said back in

Again, with the record deficits as Exhibit A, the overwhelming heft of empirical evidence militates against the Bush economic team's prognostications. Although enormous deficits and big spending initiatives seem counterintuitive to an overall policy goal of shrinking the federal government, therein lies the brilliant sleight of hand. A frontal assault on Medicare and Social Security is almost impossible to mount, and certain political suicide for those that try, but perhaps there is another way. If an administration were able to so greatly diminish the revenue stream through far reaching permanent tax cuts while encumbering the government with spending obligations (Iraq, prescription drug benefit, etc.), they could create a fiscal crisis that requires drastic countermeasures, especially in regard to entitlement programs on the verge of feeling the baby boomer strain. Just like the Superfund's diminished priority, that potential economic climate would necessitate tough decisions, even on seemingly sacrosanct programs such as Social Security and Medicare.

As with the ability to secure Congressional disbursements for the Superfund, will the Republicans in Congress and the White House soon be allowed to plead that in relation to gutting Social Security and Medicare, the circumstances made them do it? Will the American people allow the same politicians whose policies ran up the deficits and shrank the revenues necessary to pay them down, claim that the deficits are to blame for the impending massive cuts to entitlements, and not their own fiscal policies?

Make no mistake, with Iraq continuing to hemorrhage money, and the President intent on making his reckless tax cuts permanent, the arguments of fiscal necessity are coming and they will threaten the prolonged life of Social Security and Medicare, especially with the imminent retirement of the baby boomers. Grover Norquist's long sought after starve-the-beast showdown is on the horizon, and it will be carried out under the guise of the circumstances being beyond the control of the politicians. In fact they will blame the entitlements themselves for being unsustainable. Will the so-called liberal media remind them of the road taken to the fiscal crisis?

There is a saying that if you drop a frog into boiling water, it will leap out immediately feeling the shock to its nervous system. But if you place that same frog in tepid water and bring it to a boil slowly, the frog won't react to the gradual change in temperature and remain in the water until fully cooked. In the fiscal sense, we are in the midst of a slow boil. [emphasis added]
TIA triumphalism aside (it wasn't really any great feat to see this one coming, even the word choice itself), I'd be interested to see how many times this mantra is repeated over the coming months, and years, if the Democrats succeed in mounting a stiff and disciplined resistance that denies bi-partisan cover to the Republican lawmakers that want to go ahead with Bush's plan to phase out Social Security. My advice to the Democrats: make the "hard choices" rhetorical device work for you. The truth of the matter is, it really is about "hard choices," just not the ones being presented by the GOP. In simple terms, the "hard choices" are between making Bush's top-heavy tax cuts permanent (and adding new tax cuts aimed at the upper brackets as put forth in his current budget proposal) on the one hand, and preserving Social Security and Medicare on the other (a related choice might be a restructuring, if not scrapping, of Bush's wasteful and increasingly expensive prescription drug bill).

That is the "hard choice": permanent tax cuts primarily aimed at the wealthiest Americans, or the future viability of Social Security. You can't have both.

Kevin Drum thinks some Republicans may be coming to grips with the electoral realities of voter backlash come the midterm elections and beyond.

Life in Washington DC must be like life in Wonderland these days. Here's the Washington Post on the current mood regarding tax cuts:

To be sure, Bush and most congressional Republicans, especially in the House, remain committed to cutting taxes as a guiding principle. Some leaders are considering pushing this year to extend some of the tax cuts enacted in 2001 and 2003, including those for capital gains, at the very least. But after cutting taxes aggressively over the past four years, a growing number say it would be unwise to reduce the amount of money the government is taking in at a time when bills for Medicare, Social Security and the Iraq war are piling up.
It might be "unwise"? That's the best they can do? After spending the past three months screaming about how a 2% Social Security deficit 75 years from now is ruinous to the moral fiber of the nation?

Still, I guess I'll take my common sense anywhere I can find it. Apparently even the idea of making Bush's tax cuts permanent is running into trouble:

Senate Finance Chairman Charles E. Grassley (R-Iowa) said at least six Senate Republicans have signaled opposition to extending the cuts. "They could keep it from getting done," he said. "But I think most people would like to make them permanent."
I'll bet he's right. And we'd all like a visit from the tooth fairy too. But eventually we all have to grow up and work for a living. Even Republicans.
Speaking of "growing up," Kevin also points to this must-read piece in the Washington Monthly about a host of Republican governors who have been forced to jettison their anti-tax crusade (much to the outrage of erstwhile fellow traveller Grover "Starve the Beast" Norquist), in favor of policies that actually...get this...raise taxes on the wealthiest residents of their states in order to pay for needed social services. Go figure. Here are some choice quotes.

Alabama Gov. Bob Riley last year ignored his votes in Congress for deficit-expanding tax cuts and instead pushed a referendum to raise taxes on his state's top income earners to deal with budget shortfalls.

In Indiana, Gov. Mitch Daniels is calling for an income tax increase on his state's top income earners. This is the same Mitch Daniels who, as President Bush's budget director from 2001 to 2003, attacked congressional Democrats who proposed doing the very same thing.[...]

"Grover's never been in government, doesn't have to balance a state budget, never had a state constitution forcing him to deal with a balanced budget," Mr. Huckabee [Republican governor of Arkansas] said at a meeting with editors and reporters from The Washington Times.

"Grover's never been in a situation where he couldn't borrow money so he didn't have to raise taxes or tell old people he's just going to take them out of the nursing home and drop them on the curb," he continued.
And get this, one of the prime movers behind efforts to rein in some of the anti-tax czars is actually big business. The following paragraphs discuss an interesting dynamic emerging in relation to a piece of legislation recently passed in Colorado called the "Taxpayers Bill of Rights, or TABOR which attached an amendment to the state constitution that required any tax increase to be approved by a vote of the people and limits state spending increases to inflation, with adjustments made for population growth."

But while Colorado has been terrific for TABOR, TABOR has been a nightmare for Colorado, and for Colorado Republicans in particular. The state budget was fine as long as the state's economy was growing, and bills could be pushed into the following year. Once things slowed down, retrenchment became a serious business just as health care and education expenses began to shoot upwards. Thanks to TABOR, the state can't increase its spending on roads and other expenditures it's been putting off. Now, Gov. Owens himself has proposed a ballot measure to curtail some of the law's limits.

Business is the chisel driving a crack between moderate Republicans and the anti-tax fanatics. Although there is no group in Washington more loyal to the GOP's anti-tax doctrine than the Chamber of Commerce, in the states, reality often trumps ideology. "For businesses to be successful, you need roads and you need higher education, both of which have gotten worse under TABOR and will continue to get worse," says Tom Clark of the Denver Metro Chamber of Commerce, who notes that higher education has shrunk from 25 percent of the state budget in 1995 to about 10 percent today. "I'm a Republican," Clark says, "but I made the decision not to give any money to the state party."
I think reality is hitting the Grover Norquist movement smack dab in the face, and Bush's Social Security phase out quagmire is just the most prominent national example. As I have argued before, we need to seriously re-evaluate the attitude we as Americans have toward taxation. I understand that human nature makes the payment of taxes a somewhat painful experience for most, if not all, but there is no such thing as a free lunch. In relation to measures such as TABOR, I would say be careful what you wish for. As I wrote back then:

Taxes are what you pay for physical security (the military, police force, fire department, etc), transportation infrastructure (including highways, roads, ports, railroads, airlines, mass transit, etc.), economic health (the banking system and its regulation, antitrust rules, corporate governance - which invites investment in our markets, monetary policy, etc.), public protection (the courts, environmental standards, workplace safety, regulation of food and drugs, regulation of the health care industry, etc), welfare of the citizenry (sanitation, public education, state universities, Social Security, Medicare, day care for working mothers, child protection, unemployment insurance, workers compensation, etc.), and the list goes on.
Balance is needed in this debate, as it is also clear that government spending can be wasteful, excessive, and inefficient at times. At least now some members of the GOP are realizing that even some of their staunchest allies might not be so bullish on a federal government so pared down that it cannot deliver on many, if not most, of those imperatives. I can't say that the Bush administration has accepted this reality yet, but one day I hope someone can say "I told you so" about the error of my mounting pessimism.

[Update: If brevity is the soul of wit, Atrios is wittier than I:

Short version: Greenspan supported 11 trillion in tax cuts and then woke up and discovered the baby boomers would retire and cost $3.5 trillion -- and the retiring boomers are the fiscal problem.
Heh. Some tough choice.]

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