The Republicans failed on health care, but now they are offering a new plan for tax and spending cuts, with a promise of smaller government.
But the GOP, with few exceptions, seems about as creditable as the Democrats and their flawed, small-business killer, Obamacare. Many of the Democrats are people who subscribe to a socialism without doctrines; a kind of backdoor collectivism. So now, as they expect the Republicans to fail and lose control of Congress, naturally many of them are waiting for their chance to ram a single payer health care system down the throats of already overtaxed Americans.
Many Americans thought they were voting for less government in 2016, but they have been disappointed again and again by a Rockefeller/Bush wing of the GOP that doesn’t seemed interested in rolling back government, merely slowing the pace of its expansion. This was a philosophy explained to me by a prominent republican over a decade ago as I will detail soon.
Sir, Could You Just Give Us One More Chance?
Still, Republicans, in their recent budget document say they will get taxes and spending right this time. This is reminiscent of the character Hoover in the 1970s movie Animal House. In the wreckage of a college homecoming parade that he and his fellow expelled hooligans have just destroyed, he pleads with the college dean, “This may seem an inappropriate time to bring this up, but could you just give us one more chance?”
Republicans want just “one more chance” to roll back an out of control government that they helped to build. So now they have offered their proposals in their economic game plan, “Building a Better America.” It calls for cutting taxes and details the outrageous overreach of government.
And while the GOP budget statement does a good job of documenting the spending problems of too much government, the plan has several flaws: It doesn’t go far enough in cutting back government. It is offered to us by many of the same people who created a lot of the problem over the past generations.
The Fox Guards the Henhouse?
Indeed, these are some of the same lawmakers who gave us big, intrusive and deficit laden government for generations. In reading over this document and its warnings that government deficits now threaten to destroy our nation, one gets the impression that these Republicans were a bunch of Mr. Smiths who just arrived in Washington. However, the truth is quite different.
As I read “Building a Better America” I was reminded of the comment of a Republican stalwart Dick Cheney.
The former republican vice president and defense secretary is often quoted as dismissing deficits.
“Reagan proved that deficits don’t matter,” Cheney famously said.
Yet deficits do matter.
Red Ink Does Matter—That’s What the GOP Now Says
How do I know?
Well, I know in part because I have reviewed some of the few truths of this GOP document, given to us by a party that has controlled all or parts of Congress for over a decade. Yet the republicans, without mentioning their own sins, without mentioning the fact that they have controlled the House of Representatives for over a decade as well as the entire Congress for almost three years, warned in “Building a Better America” that government red ink is becoming outrageous. They argue the obvious: That entitlement spending promises will eat up much of the earnings of an unborn generation. Here is an example of the Republicans latest missive:
“Under current law, the Congressional Budget Office [CBO] estimates that the annual budget deficit will balloon to over $1.4 trillion by 2027 – driven mostly by an increase in mandatory spending programs – absent swift and decisive action to rein in federal spending,” according to the republican document. However, it doesn’t mention that many republicans have voted for these programs and their perpetual expansion.
But if this pattern of red ink continues over the next generation or so government spending will be bigger than the economy, the republicans say, pointing to CBO numbers.
“Deficits will continue to rise over the coming decades, with federal debt held by the public reaching 150 percent of the size of our economy in 30 years. Taxes will eat up more and more of American work. Again, it is the CBO, often maligned by some republicans, to which the Republicans refer.
“The policy problem facing the United States is that spending rises above any reasonable metric of taxation for the indefinite future,” according to former CBO Director Doug Holtz-Eakin in a recent House Budget Committee hearing.
“Our fiscal path,” added Gene Dodaro, the Comptroller General of the United States, is on the road to disaster. He said the pace of spending “is unsustainable, and if we fail to get control of debt and deficits, we are putting our country at risk of a fiscal and economic crisis.”
This is an old story. Some 17 years ago, the Kerrey-Danforth Entitlement Commission came to the same conclusion.
Indeed, the GOP study now finds that two-thirds of the nation’s annual budget funds government programs such as Medicare, Medicaid, and Social Security. They are not subject to annual review by Congress. Here we see the GOP hedging; its acknowledgement of a serious economic/philosophical threat to economic liberty and yet a reluctance to do something of substance. Here is more of the GOP statement.
“While these programs are vital to the people they serve, their spending rates are unsustainable and the key drivers of our nation’s fiscal challenge,” the GOP document says.
The Republican Anomaly
However, are these right-wing critics of the welfare state really the ones to end or dramatically reduce it?
This document is just as important for the questions that it doesn’t pose as the ones it does pose. Yes, most reasonable people agree that the federal government’s warfare/welfare spending and money printing are unsustainable. But the GOP doesn’t seem to believe there any private alternatives to runaway government spending; to changing the entitlement mentality that leads many Americans to believe that only the government can take care of them; that they, unlike their grandparents, are incapable of providing for themselves.
Look again at “Building a Better America,” where is the mention of at least privatizing some or all of Social Security? There is none. What would happen if even some Americans were allowed the spend their money on private alternatives to Social Security and other government welfare programs?
Without doubt, some economically sage people would start putting their Social Security “contributions” (sic) into index funds or other investments that earn much more than low yielding treasuries, which are the norms of Social Security’s investment policy. They know that the long-term return of the stock market—-about nine percent a year, not for everyone, but the average is about nine percent for the long-term investor—is much better than the return one will get from Social Security payments even if you live to 100.
Social Security is a lousy deal as consumer advocate Warren Shore and financial planner Helen Rogers outlined more than thirty years in various books and publications such as “Social Security, the Fraud in Your Future” and “Social Security: An Idea Whose Time Has Passed.” The Social Security politics of that era also resulted in the huge payroll taxes imposed on the younger workers of the 1970s and 1980s as I remembered when I was starting in the workforce (“What the hell is this FICA thing that eats up so much of my earnings,” I used to ask people at various offices). I outlined here some years ago in my “The Disastrous Deal of 1972”, which is at Mises.org.
These small Social Security payments, in a ludicrous form of double taxation, have actually been taxed since the 1980s. That’s something few would have believed that could happen in the 1960s and 1970s when people would pay into the system for 40 or 50 years, but would have never believed that they would pay tax on their payments. And more and more Social Security advocates, fearful for the fiscal stability of this program of robbing Peter to pay Paul, say that a higher percentage of these payments should be taxed. Some even want to go farther than that.
New Jersey Governor Chris Christie, another Republican who is not going to dismantle the welfare state, went even further in the last election. He said these payments should possibly be means tested as a way of saving Social Security. Under the Christie proposal people would be penalized for private retirement saving.
The anomaly of the “Building a Better America” document is the GOP will identify the sins of too much government, but really are proposing very little to correct them. Take the discussion of Amtrak, the government’s ramshackle passenger railroad system. It was created by a republican administration in the 1970s. That’s something omitted from “Building a Better America. “Amtrak has been a subject of almost constant discussion here in New York over the last few months. Amtrak’s close to half century of disaster has been highlighted as its poorly maintained Penn Station has been falling apart.
Republican Socialists?
In this section of “Building a Better America” some part of the GOP, despite all the criticism of the federal government in this document, reveals itself as wanting to put a human face on socialism; attempting to save some parts of big government even as it crumbles. Despite hundreds of billions of dollars sunk into Amtrak since the 1970s, the GOP only proposes “to reduce” subsidies for Amtrak. It doesn’t propose to get rid of it. And here is how the supposed party of small government phrases it.
“The budget assumes reduced federal subsidies for Amtrak’s operations. Federal subsidies have insulated the National Railroad Passenger Corporation [Amtrak] from becoming self-sufficient, and they commit taxpayers nationwide to underwriting the commutes, recreation, and other trips for a fraction of the traveling public. The 1997 Amtrak authorization law required Amtrak to operate free of subsidies by 2002. Yet taxpayers continue subsidizing Amtrak tickets,” according to “Building a Better America.”
Again, the GOP is correct in its analysis, although its history is incomplete. Actually, the Republican Nixon administration, started this mess. Back in the 1970s it began the ill-fated Amtrak. Then the Nixon administration, promised “the greatest turnaround in business history.” (From the book “End of the Line: The Failure of Amtrak Reform and the Future of America’s Passenger Trains”).
Amtrak was going to make money? Almost a half century later, that’s a comical comment except that the joke has been on American taxpayers.
So how will Republicans fix the trains? They promise to “reduce” the Amtrak subsidy.
Reduce it?
What happened to the days of ending the national railroad that has literally and figuratively gone off the tracks. And here is the basic problem with “Building a Better America.”
George Explains It All
Most republicans here aren’t proposing to dismantle the warfare/welfare state, they are actually saying they can manage it better than Democrats. This was clearly explained to me by Republican columnist George Will at a Security Traders Association conference I attended about 15 years ago while working for Traders Magazine.
“Republicans are doing a better job at running the welfare state than Democrats,” said Will in his speech to the traders.
What?
I immediately thought of the now forgotten republican traditions of opposing the welfare state, of its pacifist, isolationist foreign policies of Robert Taft and of its raising concern of the economic and cultural dangers of too much government.
As Will hurried out, I couldn’t resist stopping him.
“Great speech, Mr. Will,” I said as he started to puff up and I thought he expected me to ask him for an autograph, but nevertheless I unleashed my ambush.
“Yes, sir, now I know why I’m a libertarian,” I said.
He grumbled, shook his head and hurried away as fast as he could. Maybe that’s what we should do with the ideas of the GOP’s “Building a Better America”.
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