Sunday, February 24, 2013

“Simpson-Bowles 2.0”

Sydney M. Williams

Thought of the Day
“Simpson-Bowles 2.0”
February 25, 2013

“Situation Hopeless…But not Serious” was the title of a 1965 film starring Alec Guinness. It is the story of two American World War II pilots who are forced to bail out over Nazi Germany. They are taken in by a German (Alec Guinness) who enjoys their company so much he doesn’t tell them when the war is over. After seven years they finally escape into a peaceful West Germany. The recent decision by Alan Simpson and Erskine Bowles to revitalize their debt and deficit reduction plan just seems hopeless. None of our elected officials on either side of the aisle (with the possible exception of Paul Ryan, Tom Coburn and perhaps a few others) have any inclination toward addressing what is a mushrooming problem – our debt and deficits. A condescending and irreverent Greg Sargent, in a recent column in the Washington Post, suggested that Mr. Simpson and Mr. Bowles seem “like a pair of aging crooners.”

The new Simpson-Bowles plan is similar to the first in that it relies on reduced spending and increased taxes. It differs in that there is a greater emphasis on spending cuts than on tax increases, and that has the Left up in arms, despite the fact that taxes were raised unilaterally at the start of the year. Mainstream media has become apoplectic. As Derek Thompson, writing in the Atlantic put it: “This plan all but gives up on the idea that balancing the budget requires a roughly equal mix of tax hikes and revenue cuts.” Kevin Drum, writing for “Mother Jones” makes the same point more colorfully: “I guess they figure that conservative sacred cows are a little more sacred than liberal ones.” Similar comments were posted by those writing for the New York Times and the Washington Post.

The problem, in my opinion, is far more fundamental. There is a growing sense among millions of Americans that money spent by government is free – that it has no cost. I hear anecdotal evidence of such beliefs all the time, as I am sure you do. Why don’t they fix these potholes? Why do we not have street lights all along 95? Where are the cops when we need them? Try telling any senior that his Social Security is to be halved. As the country moves toward 50% of the wage-earning population not paying federal income taxes, this attitude will only increase. The automatic withholding of payroll taxes, implemented during World War II, proved a painless, surreptitious seduction of American taxpayers. It has had devastating consequences. Should all taxpayers actually have to write checks to the government every quarter, the size of government would likely be far smaller. Voters today are willing to raise taxes on the rich, because 98% of them would be unaffected, but the idea of raising middle income taxes has been met with resistance, because too many taxpayers would be affected.

The idea that government-spent money is free is not confined to the taxpaying public. It is an attitude, unfortunately, endemic to those who work for government. And that attitude is not exclusive to one Party; though former Indiana Governor Mitch Daniels made a point of reminding state workers that they were servants to taxpayers. Nevertheless, Republicans are generally every much as guilty as Democrats. When was the last time you saw a member of Congress in a suit from Sears? While salaries of Congressional members are relatively modest, non-taxable expense accounts are multiples of their income. Their haughty attitude was captured recently, as Nancy Pelosi refused to consider a pay cut for the House: “It would be beneath our dignity.”

The principal problem in Washington is spending on entitlements. And, sadly (and realistically) there is little that can be done to change it. Those of us who have had children know the love and affection we get when we give them something they want, and we also know the tears and the resentment we get when we take something away that they like. Politicians are smart enough to know that that aspect of human nature extends to adults. Despite the ultimate consequences, Democrats for decades have taken advantage of that knowledge, placing Republicans in the role of having to play Starbuck to the Democrat’s Ahab.

Peggy Noonan, in the weekend edition of the Wall Street Journal, has a far simpler explanation for Mr. Obama’s emphasis on taxes over spending cuts. “He wants the rich to pay more and those he judges to be in need to receive more. End of story. Debt and deficits don’t interest him, except to the extent he must give them lip service.” In my opinion, Mr. Obama, despite his poll numbers and the adoration he gets from mainstream media and Democratic Congressional leaders, is an outlier. He is uniquely protected by the veneer that criticism of his policies would be seen as personally racist. In my opinion, and despite the polls, he doesn’t represent mainstream thinking.

Many Democrats are concerned about the direction we are heading. They have to be. A recent Wall Street Journal op-ed, quoted by Leeds on Finance last week noted: “Orange County beach lifeguards are retiring at age 51 with a $108,000 pension plus healthcare benefits.” Politics has become a world of make-believe. “If wishes were horses, beggars would ride,” is an old English proverb. In Washington everyone now dines on ‘Wish Stew.’ Promise them anything, seems to be the accepted slogan, but they fail to add that the costs will be born by our children and grandchildren. Ken Langone was blunt last week: pursuing the President’s vision “is eating the grandchildren’s breakfast, lunch and dinner right now. And the grandchildren haven’t been born yet.”

The creed of ancient Epicureans was “eat, drink and be merry, for tomorrow we die.” That creed has been assumed by too many of those we send to Washington. We send them not only to pass laws and protect our lives and property, but as fiduciaries of our tax dollars. How many in Congress have the slightest concept of the duties of a fiduciary?

Our representatives in Washington pontificate piously and pompously about fiscal matters, but they do very little. A cynic might ask, do they truly want to suffer the torment of resolving the problem – the resolution of which might cost them their jobs? For decades, they have been able to kick the can down the road. Who’s to say that that road is now ending? With one eye on their own retirement and another on polls, they try to measure how long the game can be played: what are my re-election chances and how close am I to retirement? They have immunized themselves from what surely will be the unaffordable aspects of the Affordable Care Act and have ensured that their own retirement pensions are secure. I am sure there are many in Congress who do care, but unfortunately there are obviously far more who do not.

Nevertheless, unless brakes are applied soon to this run-away spending, there will be an unpleasant rendezvous with a brick wall. It is that fear that prompts decent people like Alan Simpson and Erskine Bowles to act as they did. Both men have been successful. Both are patriots; Simpson served with the U.S. Army and Bowles with the U.S. Coast Guard. Both men have served in politics: Simpson as a U.S. Senator and Bowles as Chief of Staff for President Clinton. Both could easily have retired in peace and comfort. Neither needs the notoriety their plans have brought them. While it is unlikely that anything comes from their efforts, trivializing their efforts is marginalizing two men who have chosen to address a problem that others, who are responsible, have chosen to ignore.

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