The budget debate we should be having

Everyone knows that the federal budget is out of control and that, unless something is done soon to reform how we collect taxes and structure entitlement spending, our fiscal future is bleak.  Given that, it seems obvious that responsible governing requires lining up the various fiscally sustainable plans and choosing one.  That is, the debates over the proper size of government, etc. should be within the context of federal budgets that are somewhere in the neighborhood of being balanced.  At the very least, they should not have explosive deficits as part of their design.  It is not a simple matter to project the federal budget for years into the future, and there is a great deal of disagreement over the economics behind the various tax and spending schemes.  But, at the very least, we should only be debating budget plans that make a good-faith effort at sustainability.

Consider five representative budget plans that are out there: President Obama's, Paul Ryan's, the Bowles-Simpson Commission's, Ron Paul's, and that of the Congressional Progressive Caucus (CPC).  Four of these plans are designed to achieve fiscal sustainability, although the means by which they do it span the spectrum.  The Paul and CPC plans represent the two extremes: The Paul plan includes huge cuts to taxes and spending, whereas the CPC plan does the opposite.  In the middle are the Ryan and Bowles-Simpson plans, which differ mostly on how to manage health care, Medicare, and Social Security.  Roughly speaking, the former uses market mechanisms and competition to control costs, while the latter uses government bodies to take over these markets.  What these plans have in common is a complete overhaul of our ridiculously inefficient and complicated tax structure: Both include significant cuts to tax rates along with greatly reduced deductions and tax expenditures.

If we exclude the Paul and CPC plans as having no chance of being adopted, then the debate we should be having is between variants of the Ryan and Bowles-Simpson plans.  Instead, we are debating the Obama and Ryan plans, the former of which is destined to achieve fiscal ruin.  In fact, according to Tim "Turbo Tax" Geithner, it's a stretch to say that the administration has a plan at all.  As he told Paul Ryan, "We're not coming before you to say we have a definitive solution to our long-term problem. What we do know is we don't like yours."

Keith Hennessey has a handy comparison of the Ryan, Bowles-Simpson, and Obama plans.  In short, we should be arguing over the purple and red lines, but, instead we're arguing over the blue and red lines.