In the past few months, we have had a number of lively posts by Pileus contributors and readers over the question of fiscal responsibility. Some of the posts were focused on the problem of long-term unfunded entitlements. Some revolved around the question of whether a revivified GOP would embrace fiscal responsibility. Most recently, there have been postings about the National Commission on Fiscal Responsibility and Reform.
Most students of public policy know that creating a bipartisan commission is a key indicator that no one is prepared to deal seriously with an issue (e.g., remember the Financial Crisis Commission? Its report—mandated by Congress as a means of informing the legislative debate is due December 15th). But the rapidity with which the President and Congress threw the National Commission on Fiscal Responsibility and Reform under the bus is somewhat stunning.
Within a week of the Commission’s report, the President and the GOP have struck a deal that would add another $900 billion to the national debt. The individual components are significant of course:
- A two-year extension of the Bush tax cuts
- A thirteen month extension of unemployment compensation
- A temporary 2 percent cut in the payroll tax
- The reintroduction of the estate tax (at 35%), albeit with an exemption for estates below $5 million.
The events of the past few days have led to a number of insights. First, it seems clear that President Obama—unlike his predecessor—does not mind negotiating with himself. Second, one may conclude there is now clear recognition that Obama has capitulated on a major point: whether tax cuts or spending are better means of stimulating a moribund economy.
The chief lesson: Regardless of partisan stripe, there is no concern whatsoever with long-term fiscal responsibility. Not only are members of both parties happy to add another $900 billion to the national debt, they are willing to do so by further endangering the financial footings of Social Security and Medicare via the payroll tax cuts.
Do we need another indicator of how seriously our legislator take the issue of fiscal responsibility? As Kenneth Vogel and Manu Raju report in Politico
Senate Majority Leader Harry Reid is trying to use the tax cut package President Barack Obama brokered with Republicans to legalize online poker…Already, the online poker proposal has exposed the Nevada Democrat to charges of flip-flopping on a controversial issue, as well as using his Senate leadership position to repay big casino interests that helped him win reelection in a hard-fought campaign against Republican Sharron Angle last month.
My prediction: the debate on fiscal responsibility and the long-term problem of unfunded entitlements—at least on Pileus—is not approaching closure.
Any thoughts on the Obama-GOP tax agreement and its fiscal implications?