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US budget debate signals the death of optimistic liberalism

The Republican and Democratic budgets released last week share little common ground. But both illustrate the same point: for all the talk of a new liberal America in the wake of Barack Obama’s re-election…

Despite all the talk of a new liberal America in the wake of Obama’s re-election, the economic debate has from both sides is staunchly conservative. AAP

The Republican and Democratic budgets released last week share little common ground. But both illustrate the same point: for all the talk of a new liberal America in the wake of Barack Obama’s re-election, for all the leftward movement on social issues like marriage equality, the economic debate in the United States remains firmly right of centre.

It’s no surprise that the Republican budget, devised by former vice-presidential candidate and wonkish wunderkind Paul Ryan, is red meat for the Right. Ryan has been producing the same budget, with minor alterations, for several years now. This version introduces a ten-year timeline for balancing the budget (versus the previous version’s 28-year timeline), but the change is meaningless. The maths in Ryan’s budgets never works. It doesn’t have to. It’s not a roadmap for a balanced budget – it’s a manifesto for fundamentally rewriting the social contract.

Ryan proposes $4.6 trillion in spending cuts over ten years, with no increased revenues. The majority of that – a full 59% – comes from cuts to healthcare programs. The Affordable Care Act (aka Obamacare) would be repealed, though Ryan retains the ACA’s taxes and Medicare cuts. Throw in additional cuts to Medicaid (healthcare for the poor), and 35 million Americans would lose health coverage.

The rest of the savings comes from interest and non-defence discretionary spending. That spending – on infrastructure, education, research, housing, public health, and so on – would be slashed to the bone, reduced to 2.1% of the GDP, a historic low. The federal government really would be small enough to drown in a bathtub, as anti-tax activist Grover Norquist has long dreamt.

Well, most government. Defence spending remains almost untouched, as does Social Security. (Neither budget makes any cuts to Social Security, demonstrating it remains the third-rail of American politics.) And then there are taxes. Ryan sets a goal of dropping the top tax rate from 39.6% to 25%. On its own, that cut carries a $6.7 trillion price tag. Since closing loopholes on the wealthiest Americans won’t generate that much revenue, a balanced budget would almost certainly require higher taxes on low- and middle-income earners.

This is what Mitt Romney’s infamous 47% comments look like in budget form.

Given the bold economic conservatism of the Republican budget – which columnist Ezra Klein notes would “fundamentally transform the relationship between Americans and their government” – the Democratic budget looks quite liberal. The proposal put forward by Senate Democrats on Wednesday presents a one-to-one plan: for every dollar in revenue increases, there’s a dollar in spending cuts. It also includes a $100 billion stimulus package. In trimming $1.85 trillion from the federal budget over ten years, the Democrats offer not a balanced budget, but sustainable deficits of around $500 billion.

Worlds apart from the Ryan budget, the Senate Democrats' budget rejects the notion that deficits are the most pressing economic issue during a fragile economy. Instead of eviscerating programs for the poor while lowering taxes on the wealthy, the Democratic budget does the reverse: it taxes the rich to preserve programs aimed at middle- and lower-class Americans.

Still, this is no liberal version of the Ryan budget. It includes nearly a trillion dollars of spending cuts, in addition to the trillions in cuts passed in the last few years. It leaves open the possibility of tax reform through loophole-closure rather than higher rates. And although it protects investment, it does little to increase it.

Even with all that, the Senate Democrats’ budget is to the left of Obama’s so-called “grand bargain.” (Yes, there are actually three budget proposals. Well, four, but we’ll get to that in a minute.) Obama’s bargain is a centre-right plan if ever there was one: $400 billion in cuts to Medicare, means-testing and reduced benefits for Social Security, and lower revenue increases than the Senate.

Both the Senate and the President’s plan seem more in harmony with the centrism of the Clinton years than the liberalism of mid-century America. In his 1965 inaugural address, Lyndon Johnson promised to welcome the new world being born, and then to “bend it to the hopes of man”. That sort of optimistic, transformative liberalism is absent from the budget debate.

Mostly absent, anyway. The House Democrats’ progressive caucus put out its own budget, one which rivals Ryan’s in both scale and unattainability. The progressives propose a $2.1 trillion stimulus program. (For perspective, the 2009 stimulus act was around $800 billion.) They help fund that spending with $4.2 trillion in higher taxes over ten years, including a carbon tax. The top marginal rate for Americans making over $1 billion would jump from 39.6% to 49%.

Like Ryan, the progressive caucus has put forward a plan for a new world bent to their version of “the hopes of man”. Unlike Ryan, they won’t have a seat at the table when it comes time to wheel and deal. The Ryan plan is the Republican plan. The progressive plan won’t figure into the discussion at all.

While it may have no impact on the debate, the progressive’s budget highlights just how far to the right the main debate is. While social conservatism may be on the ropes, economic conservatism remains the dominant framework for the budget debate in America.

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3 Comments sorted by

  1. Michael Shand
    Michael Shand is a Friend of The Conversation.

    Software Tester

    Brilliant Analysis, great article, thank you for posting.

    Obama is Fiscally Conservative, Socially Liberal - He aint no progressive

    Gay Marrige has over 50% support from the American Public so he shouldnt get any credit for that, its a very safe position now a days

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  2. Rory Cunningham
    Rory Cunningham is a Friend of The Conversation.

    Test Analyst

    I had no idea the republican budget theories were that crazy. It just screams 'tax the poor, give to the rich'

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  3. Peter Ormonde

    Farmer

    Excellent and thoughtful bit of observation.

    Seems we are watching something unravelling at the centre of the US "consensus" ... very sad really given the lofty hopes of the founding fathers. Those ideals are sadly missed.

    Declining empires are dangerous things as those believing they are under siege turn on and eat each other.

    Best we keep well out of the way.

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