America’s Reality Check

One of the drawbacks to the concept of “American exceptionalism” is that it has instilled a belief that the nation can have everything in perpetuity — the best military in the world, a vibrant economy, low taxes and a growing welfare state — just because we’re Americans.

For decades, with times relatively good, this belief allowed the nation to ignore those who warned about the threat posed by the tremendous growth of the federal government. Yet when the financial collapse hit in 2008, it ushered in an era of annual trillion-dollar deficits, giving Americans just a small taste of what the future holds.

The conflict over the size of government is not merely a numbers game, but a generational issue. If federal spending grows at its current trajectory, America will become a nation of stagnant growth, high unemployment, crushing tax rates, and runaway inflation. Its military strength will deteriorate substantially, making the nation more vulnerable. And younger generations of Americans will experience a substantially worse standard of living than their elders.

Over the past several weeks, Washington has been flooded with deficit reduction proposals sprouting from President Obama’s fiscal commission. While none of these various plans are likely to be adopted in the near future, they do help highlight the stark contrast in visions for how to respond to the nation’s financial challenges.

On one end of the spectrum is a proposal advanced by the most liberal member of the deficit panel, Illinois Rep. Jan Schakowsky. Her plan calls for drastically cutting the military budget while raising income taxes, estate taxes, corporate taxes, payroll taxes, and capital gains taxes. She would implement “cap and trade,” add the government-run plan, or “public option” to ObamaCare, and have the federal government “negotiate” drug prices. In addition, she would spend $200 billion on more stimulus projects. In sum, her plan would put America on an accelerated course toward a European-style welfare state.

On the other end is Rep. Paul Ryan, who has already presented his “Roadmap for America’s Future.” While conceding that entitlement programs would have to remain intact for those at or nearing retirement, his plan would reform them for younger workers by emphasizing individual choice. Alice Rivlin, a member of the commission and a former director of the White House Office of Management and Budget under President Clinton, signed on to Ryan’s proposal to transition Medicare into a voucher program and turn Medicaid into a block grant to states to allow governors more flexibility. Ryan’s plan would overhaul the tax code without raising taxes, and does not involve cuts to the military budget.

Today, the 18-member commission will vote on the final report of its directors, former GOP Sen. Alan Simpson and one time Clinton chief of staff Erskine Bowles. The plan includes steep military cuts that would bring the defense budget as a share of the economy roughly to where it was before the Sept. 11 attacks. It would simplify the tax code by getting rid of many popular deductions while lowering marginal tax rates. Yet overall, it would still end up raising taxes by $1 trillion, according to estimates by Americans for Tax Reform, and move revenue as a share of the economy from its historical 18 percent to an alarming 21 percent. In addition, it would make changes to Social Security, including raising the retirement age by two years over the next 65 years.

While it has gained some bipartisan support — including from Democratic Sen. Dick Durbin and Republican Sens. Mike Crapo, Judd Gregg, and conservative stalwart Tom Coburn, the Simpson-Bowles plan is unlikely to be enacted any time soon.

That said, these proposals mark a good opportunity for Americans to question what type of country they want to live in, because the status quo is unsustainable. Do they want to maintain global military supremacy, or are they comfortable adopting a non-interventionist foreign policy and curtailing our military commitments? Do they want to keep taxes relatively low, or are they willing to accept much higher tax rates in exchange for government services? Do they want to be a nation of free markets and individual responsibility, or are they comfortable evolving into a European-style welfare state?

It’s crucial that Americans answer these questions now, because the longer lawmakers delay action, the more difficult it will be to manage the looming crisis. However inspiring the story of its founding, whatever its great achievements, no matter how strong its character has proven to be in the past, America is not immune to reality.

House Passes Partial Extension of Bush Tax Cuts

The House of Representatives just voted 234-188 to extend the Bush-era tax cuts to families earning under $250,000, denying Republicans a separate vote on extending all of the tax cuts, at least for now. Three Republicans — Reps. Ron Paul, Walter Jones and John Duncan — voted for the legislation.

The bill now moves to the Senate, where it faces certain defeat. The only reason they had the vote at all was so Democrats would be able to portray Republicans as being against middle class tax cuts, and to give Democrats a tax cut bill they could vote for, given that many of them will vote against any future bill to extend all of the tax cuts.

Here is the roll call on the bill.

How a Bloomberg Run Could Help Put a Republican in the White House

There’s been a burst of speculation about New York City Mayor Michael Bloomberg’s presidential prospects this week, with Steve Kornacki arguing that we shouldn’t write off his chances, and Dave Weigel pouring cold water on the talk, noting, “Insofar as Americans want a third party candidate, they want one who will tackle issues that both parties are, in Washington, to their left on — immigration, spending cuts. And Bloomberg is to the left of Congress on those issues. So why support him?” Include me among the Bloomberg skeptics, not just because of the ideological reasons Weigel mentions, but cultural factors as well. Despite being a billionaire, Perot had a certain populist appeal because he could pull off the folksy Texan schtick, whereas Bloomberg is a Bostonian/New Yorker who made his fortune on Wall Street. Nobody is buying him as the anti-establishment candidate. Yet I still think that were he to run, Bloomberg could have an impact on the race, and make it harder for President Obama to get reelected.

Before I explain why, I will note a data point that undercuts my thesis — a recent poll by Democratic firm PPP that showed a Bloomberg candidacy actually helping Obama. All I can say is it’s hard to read too much into polls this early, when most people don’t know Bloomberg’s actual stances on issues and they’re just expressing a generalized sentiment about the idea of a third party candidate.

Taking into account what his potential appeal could be, it’s easy to see how Bloomberg could cut into Obama’s margins among constituencies that were key to his 2008 victory.

Obama’s election was aided in part to his overtaking John McCain in the suburban vote, which George W. Bush won four years earlier. There are a lot of reasons people have given for this — generalized anti-Bush sentiment, excitement over the first black president, fear of Republicans on immigration and social issues, overindulging in brie and Chablis, etc. Though it may be hard to put a number on this group, my hunch is that there are a certain percentage of these voters who may not love Obama, could never have voted for a ticket with Sarah Palin on it, but who probably would be comfortable telling their neighbors they voted for Bloomberg.

In 2008, Obama won 67 percent of the Hispanic vote, yet he has disappointed many of them as president because of his failure to act on immigration. These disillusioned Hispanic voters may not be willing to vote for a Republican, but some of them may be willing to defect to Boomberg, who holds liberal views on immigration.

Then there’s the Jewish vote, which isn’t large nationwide, but could have an impact in swing states such as Pennsylvania and Florida. Back in April, a poll of Jewish voters found that only 42 percent would reelect Obama, while 46 percent would consider voting for somebody else. While it’s unlikely a large numbers of Jews would vote Republican, they may be inclined to vote for Bloomberg, either out of tribal loyalty or to register frustration with the Obama administration’s hostile stance toward Israel.

Could New Jersey be in play in 2012? It’s a state that’s been a classic tease for Republicans, but with the popular Chris Christie as governor, the GOP nominee could have an outside shot. That task would be made easier were Bloomberg to run — it’s a neighboring state, and has the second largest concentration of Jewish voters (after New York).

One of the big questions facing any potential GOP nominee in 2012 is how they’ll be able to hold together a coalition of independents and Tea Party-sympathetic voters. Even if he didn’t ultimately win, if Bloomberg were to chip away at these various constituencies, it would put the Republican nominee in a much stronger position to win by rallying energized GOP voters and conservative-leaning independents.

Thune, Other Midwestern Republicans Urge Extension of Ethanol Subsidies

Sen. John Thune is often touted as a possible wildcard Republican presidential candidate for 2012, but should he run, the South Dakota lawmaker will have to fight back charges that he’s part of the establshment. Thune voted for TARP and has requested and defended earmarks (though he did back the moratorium last month). Thune didn’t make his task easier this week by signing on to a letter to Senate Majority Harry Reid calling for an extension of ethanol tax subsidies. The letter was signed by 15 midwestern Senators, including five other Republicans (Chuck Grassley, Kit Bond, Sam Brownback, Mike Johanns and Mark Kirk).

Via Red State.

Is Missouri the Next Big GOP Senate Primary Fight?

In 2006, Claire McCaskill won a narrow victory over Jim Talent in the Missouri Senate race in a great year for Democrats, but now finds herself as one of the top Republican targets in 2012. McCaskill, while presenting herself as an independent voice in the Senate, ultimately voted for the key aspects of the Obama agenda. That includes the national health care law, which is so unpopular in her home state that 71 percent of voters backed a ballot measure earlier this year aimed at protecting the state’s residents from the law’s individual mandate. Last month, Republican Roy Blunt won his Senate race in Missouri by 13 points.

Yesterday, Sarah Steelman, a former state treasurer and state senator, has announced plans to challenge McCaskill, setting the stage for what could be a hard fought primary. The Club for Growth came out this morning to applaud Steelman’s entrance into the race, with Club president Chris Chocola calling it “a welcome sign for pro-growth conservatives.” By contrast, Chocola fired a preemtive strike against Talent, who is believed to be considering a rematch against McCaskill. “With a record of support for government expansion and outrageous earmark spending, it would be more difficult for Jim Talent to successfully contrast his record with Claire McCaskill’s,” he said. You can already see the conservative outsider vs. establishment RINO narrative forming.

Democratic polling firm PPP has conducted an early poll of the race, and confirms that McCaskill is vulnerable, essentially tied with prospective challengers. She has a one point edge over Steelman, while trailing Talent and Lt Gov. Peter Kinder, another possible candidate, by two points each. She doesn’t poll above 45 percent any any of the hypothetical matchups, which is typically a bad sign for incumbents. Also a bad sign — only 43 percent approve of her job performance, compared with 44 percent who disapprove.

Ryan: Fiscal Commission Proposal Would Accelerate ObamaCare

President Obama’s fiscal commission was tasked with trying to get deficits under control, but its proposals would dramatically accelerate the growth of the new entitlement program created by the national health care law, thus expanding America’s future obligations, says Rep. Paul Ryan, a member of the commission and the incoming chair of the House Budget Committee.

Among the many proposals contained in the 66-page report, one of them would begin to phase out the tax exclusion for employer-based health insurance. While supporters of a free market for health care have long argued that such a step would be necessary to create a functioning market for insurance, Ryan argues that doing so with ObamaCare still intact would have disasterous ramifications. In the world of ObamaCare, Ryan explains, when employers begin to drop insurance coverage in response to the change in tax treatment, instead of going into a competitive free market, Americans will be funnelled into the government-run insurance exchanges. This would hasten the nation’s long-term slide into a single-payer health care system.

“While I’m pleased to see the need to address the exclusion in the context of the Fiscal Commission, I have serious concerns with the consequences if applied under Obamacare’s infrastructure,” Ryan wrote in a email to TAS. “Without a healthy, vibrant, competitive market for health insurance, the proposed reforms would move employees away from job-based health insurance, and end up in the government-controlled exchanges. This would dramatically increase entitlement spending as hundreds of millions of Americans would be dumped into the subsidized exchanges. It would also result in more people being forced into the new health entitlement, at a time when we have no plan to finance our existing entitlement programs.”

Read Ryan’s full statement below.

“We must tackle the tax treatment of health insurance, which discriminates against those without job-based health benefits and inflates the cost of coverage. I’ve put forward proposals to replace the current exclusion and reroute that revenue into refundable tax credits for everyone, ensuring that those who are self-employed or unemployed receive the same tax benefit as those with job-based insurance. This reform – which I’ve put forward in several legislative proposals over the years – would delink health insurance from the workplace and attach the benefit to the individual. It is a critical step toward to promoting consumer-directed health care, a stark contrast to the government-centric approach in the President’s new health care law.

“While I’m pleased to see the need to address the exclusion in the context of the Fiscal Commission, I have serious concerns with the consequences if applied under Obamacare’s infrastructure. Without a healthy, vibrant, competitive market for health insurance, the proposed reforms would move employees away from job-based health insurance, and end up in the government-controlled exchanges. This would dramatically increase entitlement spending as hundreds of millions of Americans would be dumped into the subsidized exchanges. It would also result in more people being forced into the new health entitlement, at a time when we have no plan to finance our existing entitlement programs.

“I cannot overstate my respect for, and gratitude to, Erskine Bowles and Alan Simpson for their leadership as Co-Chairs of the Fiscal Commission. Tasked with an extraordinarily difficult challenge, they put forth a comprehensive and provocative proposal to help tackle the debt threat, advancing a sorely needed debate on these critical issues. The Co-Chairs modified proposal is a serious and credible plan. While I will continue to review their modified proposal, I have expressed serious concerns with several specific aspects of the plan – most notably the increase in taxes and the lack of structural reform to health care. Regardless of the outcome of Friday’s vote, the proposal and the commission have already successfully launched the critically important debate facing this country: how to get the Federal government’s fiscal house in order and ensure a prosperous future for coming generations of Americans.”

Deficit Panel Proposes Gutting Military

The long-awaited report of President Obama’s deficit commission is out (read PDF here). I’ll be posting on its various proposals throughout the day, some of which are quite good, some of which are extremely bad. But I wanted to start on its proposals on military spending.

Many foreign policy minded conservatives have either been disinterested in conversations about growth in the size of government or have actively facilitated it (see, for example, support in some of these quarters for the Medicare prescription drug plan). But as I’ve written repeatedly over the past several years, they do so at their own peril. When we face a severe debt crisis, military spending becomes a rather inviting target from which to wring out savings. And we can see this in the proposal of the fiscal commission, which calls for steep cuts in military spending to keep the deficit under control.

Under the fiscal commission plan, security spending would be frozen and then have its growth capped. The security budget would be $688 billion in 2012 and just $700 billion by 2020. Keep in mind that this would include not only spending on defense, but on all other aspects of security — homeland security, veterans and international affairs. All of this spending would shrink to 3 percent of GDP by the end of the decade, which is where defense spending alone was in 2000, after the Clinton era post-Cold War “peace dividend.” The commission leaves some wiggle room for ongoing and future war costs, but there are still limits on “overseas contingency operation” spending.

It’s one thing to argue that there’s waste in the defense budget, that certain weapons systems are outdated and that there are plenty of ways to spend that money more efficiently. But it’s dangerous to simply slash military spending to meet budget targets. At least during the 1990s, there was a reason to cut the military budget due to the collapse of the Soviet Union — and that still came back to haunt us when Sept. 11 happened. Now, we’re fighting two wars, facing the broader threat of radical Islam, looking at the prospect of a nuclear Iran that further destabalizes the Middle East, watching tensions build in Korea, and China continue to gain power. And yet the commission is talking about the possibility of bringing defense spending to historically low levels.

Liberals like to accuse conservatives of hypocrisy for railing about out of control federal spending and opposing defense cuts. Yet that’s a good opportunity to reassert that defense is actually a primary and legitimate function of government. The reason for that is pretty simple — it’s unrealistic for individuals, based on their own efforts, to carry out the functions of the military without a federal government. Liberals may respond, for instance, by arguing that some people would not be able to afford health care without government intervention. But at least in that case it’s something that the private market is able to provide for people who can pay. We can argue about whether this is fair or just, but the bottom line is that there isn’t even a practical way to create a market for competing private defense companies that only protect customers who pay for their services.

If the fiscal commission report accomplishes anything, it should convince anybody who supports a strong national defense that they need to start taking entitlement reform a lot more seriously.