Charlie Arlinghaus

April 11, 2012

As originally publish in the New Hampshire Union Leader

Washington is an odd place with a desperate need for adult supervision. The general lack of maturity is on display in the attitude of both political parties toward budget committee chairman Paul Ryan and his willingness to discuss the federal budget problem.

At this point, even the most casual observer of the federal government understands that the federal budget is not just a mess but a disaster. The budget isn’t balanced or close to being balanced. In FY2012, the federal government will raise $2.4 trillion but spend about $3.6 trillion, an incredible 50% more than it raises.

This will be the fourth straight year with deficits in excess of a trillion dollars. The country’s total debt will exceed 100% of GDP, the total size of the economy, this year. Ten years ago, the last time the budget was nominally balanced, total debt was half that size. Public debt, the amount the government owes to other people and not to itself, has skyrocketed in the last decade from $3.3 trillion to $11.5 trillion. If these numbers seem ridiculous, it’s because they are.

Even more incredibly, the worst is yet to come. As long term obligations start to come due, debt would rise exponentially to 200 or 300% of the economy. Or at least it would if bankrupt countries could still borrow money and the economy didn’t go to pieces. For more information, see Greece, recent history thereof.

As chairman of the House budget committee, Rep. Paul Ryan has emerged as the congressional leader in the fight to propose serious solutions to the real problems everyone agrees we face. The difficulty is that he’s proposing a solution in a city of adolescents.

Ryan has come under attack from not just his foes but his friends. Republicans who call themselves, without a hint of irony, political professionals have spoken out against the notion of doing anything, their courage careful concealed by their anonymity. A typical pinhead worried “didn’t they learn their lesson? House Republicans are under the mistaken impression they have to lead.”

You see “political professionals” fret when someone on the budget committee thinks he should put together a budget. Better the country go to hell in a hand basket than someone venture forth and have an opinion. Such is the received wisdom of Washington.

Ryan’s opponents have been critical so our anonymous weathervane has hidden under his bed afraid to come out and speak.

The criticism is so divorced from reality, I wonder if anyone will be fooled. Defenders of the current trillion dollar deficits, would have us believe that Mr. Ryan intends to slash and burn villages and cut the federal government to a mere shell of its former self.

In fact, the Ryan plan is a modest step and doesn’t cut at all. Under Ryan, spending would increase over a decade from $3.6 trillion to $4.9 trillion, an increase of 35%. Without any change, the current budget would have increased to $5.5 trillion.

So, the current budget increases 4% each year, which is fine and noble according to status quo defenders. Because Ryan increases a mere 3% each year, he’s cold and heartless. Apparently, the difference between 4% and 3% is the difference between glorious and evil devastation. Who knew?

The obstacle to any serious financial discussion is Washington is this sort of foolishness. Ryan’s plan balances the budget gradually. It adds to the country’s debt but reduces it as a percentage of GDP. The budget wouldn’t actually be balanced for another 25 years but debt would decline as a share of the economy.

This very gradualist approach is mild and not as strong as I would prefer but it would work over time. Yet, in the strange world that is Washington, D.C. this is somehow attacked as extreme because politics gets in the way.

There are similar dynamics at the state level but somehow every state in the country balances its budget the the federal government can’t. Why? Because they have no choice. The law requires it.

The culture of Washington demands deficits because responsibility is not required. The only discipline possible for these people is discipline imposed on them. Sequestration – automatic cuts in absence of an agreement – work. They worked under Gramm-Rudman in the 1980s (that’s why they were repealed) and they worked in the debate over the debt ceiling. Politicians couldn’t agree so the cuts were automatic.

The children in Washington can’t be trusted. If the carrot won’t work, it’s time for the stick.

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