View all Articles
Commentary By Steven Malanga

Don't Blame Taxpayers For the Deficit

Economics Tax & Budget

It’s become fashionable to pin the blame for our outsized national debt (to say nothing of staggering state and local obligations) on ordinary Americans who apparently want more government than they are willing to finance. In this respect, it seems, we’re really no better than those Greek protestors we’ve been sneering at. And until we own up to the fact that we are the problem, so the commentary goes, we shouldn’t expect elected leaders in Washington (or Sacramento, or Albany, or Springfield) to offer reasonable solutions to our deficit woes.

The problem with this assessment is that it is starkly at odds with the facts. A simple review of Washington’s priorities during the last two administrations ought to make that clear, especially when we compare what Washington gives us to what Americans say they want from government.

Let’s start with the newly empowered Democrats. They expended most of their political capital and an enormous amount of energy in the last year not on finding ways to cope with our long-term debt problem, but rather on passing a new entitlement program that the majority of Americans consistently said in surveys they opposed. While a presidential commission has been dithering over how to address the deficit, Washington raised taxes by hundreds of billions of dollars, using up valuable taxing capacity to pay somewhat for its new entitlement. (I say “somewhat” because anyone with a calculator can figure out that the health legislation will only make the deficit worse, or will force taxes even higher).

That health reform legislation is the biggest new entitlement since the one that the GOP gave us when it ran Congress and occupied the White House. The vast expansion of Medicare under the Bush administration was a new spending program that had little grass roots momentum. Coming from a president who ran as a fiscal conservative, the Medicare prescription drug program was a political ploy aimed at gaining a few percentage points in the polls during a reelection cycle. It was bigger government that few people were demanding, especially at a time when we were fighting two wars which, whatever else you think about those wars, were already helping to balloon the federal deficit.

Not to be outdone, our states and localities in the last decade have increased their bonded debt by about $800 billion, or 60 percent, growing it even during years of budget surpluses. Added to that are, by some estimates, $3 trillion in future state and local pension and retiree health benefits promises that are unfunded. These liabilities have soared not because taxpayers were demanding outsized pay and pension packages for government workers, but because politicians responding to narrow interest groups have liberally provided these benefits with little idea how to pay for them.

Voters have made politicians pay for these transgressions when given a chance. When Gray Davis told Californians just before the 2002 election that the budget was in fine shape, only to later reveal a massive deficit worsened by big new pension promises he endorsed, voters recalled him. When Jon Corzine promised in 2005 to fix Jersey’s budget mess by taking on expensive public sector entitlements, but instead raised taxes and did little to restrain government pay, he became a one-term governor. And President Bush might have been a one-term occupant of 1600 Pennsylvania Ave. if the Democrats had nominated someone who could take advantage of discontent over his fiscal policy. They didn’t.

It’s no wonder, then, that voters are suspicious of calls for higher taxes or ‘sacrifices’ on entitlements. But the commentariat’s response to polls which show Americans with a rising distrust of government is to dismiss those findings as yet another example of people wanting small government until they need it to clear up an oil spill, or to protect them against some rabid Islamic terrorist.

But Americans don’t yearn for government to disappear, by any means. Polls which ask people what they seek from the public sector typically find that Americans strongly favor government working to ensure public safety, provide quality schools, build essential infrastructure and enforce regulations that guarantee a livable, healthy environment. Moreover, economic development studies show that many people are willing to pay a premium in taxes to move to communities that boast those attributes.

But there is a growing gap between what taxpayers say they want and what some politicians have been giving them. Perhaps Americans will believe elected officials and media types who proclaim that we desperately need to cut the deficit when government first stops expanding entitlements, especially entitlements that a majority are not demanding. And maybe voters will consent to higher taxes when they are reasonably sure their money will in fact go to cut the debt. That will be a lot more persuasive than simply accusing taxpayers of wanting government to give them more for less. Americans know that they have to go to Wal-Mart for that.

This piece originally appeared in RealClearMarkets

This piece originally appeared in RealClearMarkets