“Honey, do you like my new dress?”
“What? That’s your third designer outfit this week. How do you expect me to pay for all of this?”
“Darling, I may be acquisitive, but I’m not inquisitive.”
Bailout fever continues apace in our nation’s capital, with our nation’s capital, or what is left of it. The automakers, like the clothes-happy wife in our joke, have joined financial institutions in lining up for cash, without asking too many questions about where it comes from. The man in the street for the most part has a bad feeling about all of this, but he has no clear sense that electing Republicans is likely to stop this bleeding.
Federal deficits are something Republicans have not spoken about out loud in quite a while, hampered by the fact that the sitting President is of their party. Being a deficit “hawk” has been used as a dirty word around Washington for a long time, and no one has come up with a prettier phrase. The guy who wants to shrink the deficit by shrinking the budget is treated like a nut, someone who needs a shrink himself.
The Congressional Budget Office is estimating a total deficit for 2008 of 455 billion dollars, compared to 162 billion the year before. It would be nice to hang this as an albatross around the neck of the new Congress, this being its first budget and all, but the President is too juicy a target, providing camouflage for those other 535 guys in his shadow.
The bill being passed to help the automakers is structured as a loan and may well work out to be just that. “Only” fourteen billion dollars is involved, pocket change for Uncle Sam. Still, alongside the previous deals with insurance companies and banks, we are closing in on a trillion dollars of tax revenues going back into the economy. We always prefer to see our money working in the private sector, but running up higher deficits endangers the solvency of our entire system.
With a new Democrat administration moving into the White House, the tendency will be to match the deficits with higher taxes. Trying to oppose them will be seen as fiscally irresponsible. Already the more knowledgeable young activists on the left are talking up their new pay-as-you-go philosophy. Now that sounds an awful lot like the Republicans’ old pay-as-you-go philosophy. So why should there not be rejoicing on both sides?
The sad fact is the Democrats have come to realize a devastating insight. They no longer need to portray themselves as tax-and-spend, because most of the big spending is so locked in by now that no one can stop it or even slow it significantly. Thus they can turn around and become budget balancers, shifting to spend-and-tax. By always taxing to catch up rather than to assume new obligations, they will be unstoppable politically and legislatively. With that kind of momentum on their side, they will be able to slip small new programs into larger bills and expand the government in less noticeable increments.
The only prospect for this to be reversed is if they lose the discipline to stay inside this model. If they make a move to create universal health care, that would open the door to a crushing counterattack. Adding new trillions of liabilities unto the current load would catch the attention of the public in a devastating way. Just as Republicans get wiped out when they really try to reform Social Security or Medicare, Democrats get wiped out when they go too global on health care, as Hillary Clinton learned in 1994.
In sum, the government under either party has not sufficiently developed its ability to say no to various petitioners for its largesse. As a real uncle learns when he bails his nephew out of trouble once too often, there comes a point where the uncle no longer has the cash and the kid no longer has any character. It is time to remember that other old joke about the two wives discussing their marriages.
“Married life is tough. Husbands are so hard to please.”
“I know. That is why I don’t even try.”