Flaws in GOP’s pledge to balance budget

Flaws in GOP’s pledge to balance budget
By Edward Luce
Copyright The Financial Times Limited 2010
Published: September 29 2010 18:41 | Last updated: September 29 2010 18:41
http://www.ft.com/cms/s/0/3070a20a-cbec-11df-bd28-00144feab49a.html


In the build-up to the UK election in May, David Cameron’s Conservative party made little bones about the fact that Britain was heading into an “age of austerity”. In his “contract with voters” that Mr Cameron issued before polling day, he observed: “We know how unhappy you are and how doubtful you are that anyone will achieve anything or change anything.”

The contrast with the Pledge to America the Republicans issued last week as the basis for their midterm election campaign could not be sharper. One party offered the 21st century equivalent of “blood, sweat and tears” – admittedly watered down as polling day approached. The other parodied Pangloss’s hope that “all will be for the best in the best of all possible worlds”.

Nowhere in the Republican pledge was there acknowledgement of the painful decisions that all Americans must confront to avert disaster. Nor was there even a hint of admission that Republicans bore at least equal responsibility for the low regard in which all politicians are held in America, as they are in Britain. Instead of medicine, there was sugar.

This is how the pledge begins: “With this document, we pledge to dedicate ourselves to the task of reconnecting our highest aspirations to the permanent truths of our founding by keeping faith with the values our nation was founded on, the principles we stand for, and the priorities of our people.”

Such was the mood music. But the real contrast was in the substance. Although Mr Cameron’s Conservatives fudged the extent of spending cuts as the election approached, they stuck firmly to the line that there could be no tax cuts if Britain were to restore its budget to balance.

In contrast, John Boehner, the Republican leader in the House of Representatives, flanked by the “Young Guns”, only one of whom is younger than Mr Cameron, promised to maintain all the tax cuts that George W. Bush instituted, never raise any taxes again in any shape or form, and do all this while restoring America’s budget to balance.

All of which might have been plausible were it to have spelt out the draconian spending cuts that would therefore be necessary to bring the budget back to surplus. But it declined to do so. Instead it ring-fenced more than three-quarters of the US federal budget – social security, Medicare and defence spending – and promised to impose caps on the remaining, “discretionary” portion of it.

In numerical terms, the $320bn the party has specified in spending cuts over the next decade is dwarfed by the $4,000bn in tax cuts that it promises – all on top of the current double digit budget deficit.

Simon Rosenberg of the NDN, formerly known as the New Democratic Network, says the idea that this would result in a budget surplus comes from the “Harry Potter school of economics”.

If implemented, the pledge would bring about a crisis in US sovereign creditworthiness. In the name of the founding fathers it would jeopardise the dollar. Which leads us to one of two conclusions. Either the Republican Party believes what it is saying, in which case it has no further useful intellectual contribution to make. Or else it thinks the US electorate is intellectually challenged and will mistake this fantasy for a plan.

The latter cannot be discounted. If the polls are right, the Republicans are on course to capture the House on November 2. At their head are leaders who voted for every spending measure George W. Bush requested, including the unfunded $600bn expansion of prescription drugs for seniors, which was probably the most egregious instance of corporate welfare in modern US history, as well as the unfunded $260bn highways bill that included the infamous “bridge to nowhere”.

These are the same lawmakers who inherited the largest budget surplus in modern US history, when Mr Bush came to office in 2001, and bequeathed the largest ever peacetime deficit to Barack Obama in 2009. Like the Bourbons, they appear to have learnt nothing and forgotten nothing. For the sake of America’s economic future, and everyone else’s, friends of the US must hope its voters have not forgotten their recent history.