We can neither grow nor moralize our way out of the predicament

Kevin D. Williams writes that tax revenues have pretty much stayed the same but the spending – how much and on what – has changed:

In 1957, when notional tax rates were dramatically higher than what they are today, the federal government collected 17.2 percent of GDP in taxes. In 2015, the federal government collected 17.7 percent of GDP in taxes — a little higher, but not all that much.

What is radically different is how much money was spent and — even more important — what that money was spent on: In 1957, we spent 9.8 percent of GDP on the military, nearly three times what we’ve typically spent in recent years — and we had a balanced budget. The overwhelming majority of our spending now is transfers and other social spending — defense accounts for less than 20 percent of outlays — and we run a substantial deficit.

There are Republicans who would like to see higher defense spending and more tax cuts, which would be irresponsible: There is no time like the present — especially the prosperous present — to get the deficit under control. But, contra Tomasky, it isn’t Republican priorities that are swelling the deficit: Those tax cuts certainly will contribute to future deficits, but they will account for about $2.7 trillion in new debt over a decade during which the national debt is forecast to increase by $16 trillion. You don’t get $16 trillion in new debt from a $2.7 trillion tax cut, even if you think tax cuts in the current fiscal environment are a bad policy. Deficit-enabled entitlement spending (like all deficit-enabled spending, and deficit-enabled tax cuts) may support demand in the present, but it does so by borrowing from the future: Just because we are not paying the bills today doesn’t mean that they aren’t going to have to be paid one of these days. The idea that the federal government is going to manage that with such finesse as to somehow make that tradeoff a winning proposition, or even a painless one, strikes me as implausible.

If you want to keep that social spending where it is, then, in the long term, you will need to approximately double federal tax collections. If you want to keep taxes where they are or cut them, you will need to cut entitlement spending.

Moaning about “inequality” in the abstract may be pretty good politics, but the concrete alternative to entitlement reform — doubling federal taxes — is conspicuously absent from the Democrats’ economic rhetoric. Democrats and Republicans both eventually must face the fact — or they will be compelled to face the fact — that the math is the math, that their choice is between unpopular entitlement reform and unpopular tax increases, and that, as Herb Stein famously put it, “If something can’t go on forever, it will stop.” Unfortunately for Tomasky et al., you can’t moralize your way out of that predicament. Unfortunately for the Republicans, we are not likely to grow our way out of hard choices, either.

And, of course, we citizens ought to grow up a little bit and take a less credulous and superstitious view of the relationship between the president and the economy. It’s not that policy choices don’t matter — lifting our absurd ban on crude oil exports has meant a lot here in Midland — but there are many forces that shape the economic scene at any given moment, many of them having not a thing to do with the views of the American president or the actions of the government over which he presides. It wasn’t an act of Congress that put oil in the ground in the Permian Basin — and it wasn’t politicians who figured out how to get it out. Years of investments, experimentation, and plain hard grunt work went into that, and very little of that work happened in Washington.

I agree that the Democrats need a new story on the economy. Republicans, too. And maybe both of them should, if only for the novelty, try one that is true.

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