The spectacularly misguided spending cap ‘compromise’

THE SPECTACULARLY MISGUIDED SPENDING CAP ‘COMPROMISE’…. One of the lingering questions surrounding the debt ceiling is what conservatives will demand by way of a ransom. We know Republicans will have to raise the debt limit; we know they’ll hold it hostage for as long as possible; but we don’t know what they expect in terms of a payoff.

Dave Weigel reported the other day that there’s growing talk about pushing some kind of spending cap as a condition for preventing an economic catastrophe. In this case, conservative Republicans like Jon Kyl and Ron Johnson support it, and some moderates from Democratic caucus — including Joe Lieberman and Claire McCaskill — are inexplicably on board, too. Indeed, after a meeting with “moderates” on Tuesday, Lieberman said he’s convinced that “something like this has a chance.”

That’s genuinely horrifying. Regular readers may recall that we discussed this idea in February, but now that it’s getting attention again, it’s worth revisiting why this a spectacularly misguided and truly dangerous idea. For perpetually confused conservatives like Kyl and Ron Johnson to endorse the measure is predictable, but Lieberman and McCaskill really ought to know better. (As disappointing as Lieberman is on a whole range of issues, he’s not usually this ridiculous on fiscal policy.)

Ezra Klein did a very nice job yesterday of cutting through the nonsense and describing the spending cap idea as “completely insane.”

Spending caps are bad policy, and the McCaskill-Corker spending cap — which holds spending to 21.5 percent of GDP, or three percentage points lower than it is right now — is a badly designed spending cap. But beyond all that, it’s laughable to posit it as a compromise: It’s arguably the most radically conservative reform that could be made to the federal budget. More extreme, by far, than Paul Ryan’s plan.

Start with the shell game at the core of this discussion: We’re worried about the debt ceiling but talking about a spending cap. This works just fine if you hew to the conservative conceit that “we have a spending problem, not a taxing problem.” But that applause line is just an effort to deny the contribution tax cuts have made to the deficit and keep tax increases from being part of a solution. If you think we have a debt problem — and that’s what being upset about raising the debt ceiling implies — then do something about the debt. The “trigger” proposal the White House included in is budget, for instance, is tied to the debt, not to spending or taxes.

Of course, to the Republicans, that’s a feature, not a bug. The virtue of a spending cap is that by focusing on only one contributor to debt, it admits only one solution to it: spending cuts. Savage ones. The Corker-McCaskill proposal is so aggressive that there are years when even Paul Ryan’s budget, with all its fantastical assumptions and hard caps, wouldn’t qualify. “You put McCaskill-Corker into law,” says Bob Greenstein, president of the Center on Budget and Policy Priorities, “and progressive policy is dead for the next quarter-century.”

That’s not an exaggeration. The Center on Budget and Policy Priorities published a detailed report on the proposed cap this week, explaining that if it were to become law, policymakers would have no choice but to enforce devastating cuts in Medicare, Medicaid, and Social Security, as well as every other domestic priority.

In effect, the cap would be a straightjacket intended to prevent the government from responding to any challenges, foreign or domestic, for the foreseeable future. Any member of the Democratic caucus even considering such a move ought to have their head examined. Any member from either party that would make this a condition for raising the debt limit has gone stark raving mad.

The “solution” doesn’t even match the problem, to the point that it seems cap proponents don’t even understand the basics of their own question. Any serous evaluation of the fiscal issue shows the same truths: we lack the necessary resources to deal with a growing elderly population and escalating health care costs. How would a spending cap help this? It wouldn’t; that’s the problem.

As Ezra added, “Health-care costs are rising far in excess of GDP growth, and a spending cap does nothing to stop them. Seniors will go from 13 percent of the population now to 20 percent of the population in 2035, which means America will temporarily have fewer people working and more people dependent on government support. But the spending cap does nothing to reverse the aging process. And amid all these trends driving up spending, Republicans are pushing to make the Bush tax cuts permanent and Democrats are pushing to make most of the Bush tax cuts permanent. A spending cap does nothing about that, either. A spending cap is an effort to deny our real problems, not to fix them.”