Democrats' Existential Debt Dilemma

Democrats' Existential Debt Dilemma

By David Paul Kuhn - December 13, 2010

If the tax deal comes to pass this term, the Democratic Congress will add more than a half-trillion dollars to the national debt to prolong a Republican president's tax cuts. Despite fierce liberal opposition, the cuts would pass under a Democratic-controlled Congress. Democrats will have their hands on a larger debt bill. Republicans will still be associated with the gift. After all, Washington is debating extending the Bush tax cuts.

Debt tends to work this way for Democrats. Whichever party increases the debt, Democrats ultimately pay politically.

This does not fit within our political schema. Conservatives argue that Uncle Sam should live within his means (except on tax cuts). Liberals argue that deficits don't mean that much (except on tax cuts). Insolvency might be a conservative issue. But it ultimately threatens liberalism.

Debt is, in fact, becoming an existential issue for Democrats. The keystone of American progressive thought holds that government is a force for good. That led to laws curtailing child labor, providing healthcare for the elderly and food stamps for the poor. But the less government can afford, the less the liberal vision can be sustained and the more the social safety net is strained.

"Those of us who care about government have to take the lead in fixing it, because the other side would be more than happy to let it all fail," said a senior administration official.

Democrats have learned this lesson the hard way. Healthcare legislation failed to win a popular mandate partly because government lacked a popular mandate. Americans were not ready to ask Uncle Sam to do more. He's already viewed as doing too much with too little, and inefficiently to boot.

"I tell my liberal economist or analyst friends, you've got to think about what you can cut in the federal government. If there are some programs that you think are crucially important then you have to be on the front lines of cutting those that are wasteful," said Chris Edwards, director of tax policy studies with the libertarian Cato Institute.

Yet Democrats are not on that front line, and they have long paid the cost. Democratic governance began to lose support by the mid 1960s, as a majority of Americans turned against Lyndon Johnson's "Great Society" according to polls. Democrats failed to recognize that what they wanted to do with government was dependent on what Americans thought of government and its priorities.

Richard Nixon only worsened this Democratic dilemma. The Republican president fell. But it's liberalism that never fully recovered. The public's view of government plummeted with Watergate. A majority still trusted government "always" or "most of the time" in 1972. Only 36 percent did by 1974. Liberals lever to enact their vision was compromised. That meant liberalism itself was compromised.

Fiscal insolvency has its own way of corroding faith in government. We see this in the markets. In total, the tentative tax-deal would add nearly $900 billion to the debt. The deal triggered a sell-off of US government bonds last week. It was a sign of renewed concerns about the American bankbook.

The American public has the same concern. They too view Uncle Sam as profligate. Early this year, the Pew Research Center named five criticisms of the federal government in a poll. The number one criticism: government was "wasteful and inefficient." Seven-in-10 voters said this was a "major problem." By comparison, the more-libertarian concerns ranked lowest. Only 46 percent of Americans said it was a "major problem" that government "interferes too much in peoples lives."

"Debt gives government a bad name," said Isabel Sawhill, the Brookings institution budget studies director. "And when you give government a bad name it's progressives who lose."

This is why progressives cannot afford to leave austerity to the right. The left has more to lose. Put another way, their sacred cows are more likely to face the chopping block. Medicare, Medicaid and Social Security consume about 70 percent of all revenue. The American budget subsists on credit.

Conservatives have political and philosophical reasons to fear any credit crisis. It would mean cutbacks in defense spending. It would require tax hikes. It would undercut American power on the world stage.

But entitlements would face the most traumatic and immediate reckoning. The big three entitlements account for about twice the share of the annual budget as defense spending, even though defense spending has sky rocketed in recent years. A debt crisis would also hit public employee unions hard, now a pillar of the Democratic coalition. Yet Republicans are more than twice as likely as Democrats to see the fiscal situation as "dangerously out of control," according to a recent Bloomberg poll.

Conservatives have the leverage in this debate. They have less to lose politically by inaction or steps that enlarge the debt, like the pending tax deal. Democrats cannot easily do more with government if Americans, and markets, already think government does too much. That means, in conjunction with GOP concessions on defense cuts and taxes, Democrats must do more than reconcile with entitlement reform, they must fight for it.

As Sawhill recently wrote in the journal Democracy: "Shielding these programs from change--almost any change--has been a winning hand for progressives in the past, including in 2005, when George W. Bush's Social Security privatization efforts crashed. But it's a political strategy that may jeopardize the entire liberal agenda going forward."

David Paul Kuhn is a writer who lives in New York City. His novel, “What Makes It Worthy,” will be published in February 2015.

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