On Fiscal Policy, the Republican Jig Is Up

The Republican struggle to reconcile House and Senate versions of a 2006 budget resolution reflects a much larger reality: When it comes to fiscal policy, the GOP is facing its moment of truth — and it’s blinking.

For years, Republicans vowed that, if they controlled the White House and Congress at the same time, they would reduce the size and scope of government by cutting taxes and restructuring the major entitlement programs that are growing at unsustainable rates. “We have the public resources and the public will — even the bipartisan opportunities — to strengthen Social Security and repair Medicare,” then-Texas Gov. George W. Bush told the Republican National Convention in 2000. “But this [Clinton] administration, during eight years of increasing need, did nothing. They had their moment. They have not led. We will.”

Republicans, of course, got their wish of an all-GOP government, and we know what’s happened to date: As they cut taxes dramatically, they spent recklessly, helping turn record surpluses into record deficits in record time. Rather than confront entitlements, they ignored Social Security and enacted the largest-ever expansion of Medicare by adding prescription drug coverage for the elderly.

Now, the chickens of fiscal irresponsibility are coming home to roost. The deficit hovers near $500 billion a year and will rise as baby boomers tap Social Security and Medicare in the coming years. The president is calling attention to Social Security’s long-term solvency by pushing for private savings accounts. The nation is increasingly dependent on foreigners to finance its deficits. And the weak dollar could prompt some investors to look elsewhere.

Surely, the time for reining in government is at hand. But, what do we see? A Republican Party without the wherewithal to do it. A Republican Party that — heavens! — would rather raise taxes than cut spending.

While its president focuses on Social Security, Republicans ignore the far more ominous fiscal challenge of Medicare, which will surpass Social Security in size in 2024 and run out of money by 2020, according to its recent trustees report. The prescription drug benefit, which Republicans mistakenly thought would realign the elderly to their side, ended up making the financial situation even more daunting.

Nor is the story different for other major programs. Medicaid, the health care program for the poor that increasingly provides long-term care for middle-income seniors, is putting enormous fiscal pressure on states that share the program’s costs with Washington. But in enacting its version of a 2006 budget resolution, the Senate stripped out Bush’s proposed
Medicaid cuts (as well as cuts to education, community development and other programs). Republicans also are balking at Bush’s proposed farm cuts, scaling them back in both the House and Senate versions of the resolution.

Meanwhile, Republicans are joining Democrats this year in the traditional spending orgy known as the highway bill. The House version totals $284 billion, the limit of what Bush vows to accept; the Senate will debate a version later this month that could go higher and risk a showdown with the president.

But, nowhere is GOP hypocrisy on spending clearer than on Social Security. The Bush push for savings accounts has prompted Republicans to weigh a key question: To strengthen the program over the long term, would they rather cut benefits or raise taxes? Remarkably, considering their longstanding rhetorical orthodoxy, they’re talking more about tax hikes. While Sens. Bob Bennett (R-Utah) and Chuck Hagel (R-Neb.) have suggested benefit cuts, their colleagues are hardly rushing to embrace them. The list of Republicans advocating or predicting tax hikes is far more impressive.

Bush says he’s open to raising the cap on payroll taxes, which stands at $90,000 of income. Sen. Lindsay Graham (R-S.C.) has a plan to do that. Sen. Judd Gregg (R-N.H.), who chairs the Senate Budget Committee, says a deal on Social Security may require tax increases. So does former House Speaker Newt Gingrich (R-Ga.).

More recently, former top Bush tax adviser Mark Weinberger told a tax conference that the growth of entitlements would help make future tax hikes all but inevitable. And conservative commentator Bruce Bartlett wrote in The New York Times that he’d now support a new value-added tax to close the deficit because Republicans don’t have the stomach to confront runaway federal health care spending.

So, the jig is up. Republicans always say they want to cut taxes and cut spending. Oh, they’ll cut taxes. But when it comes to spending, even on the New Deal and Great Society entitlements that increasingly define the size and scope of government, they’re just as addicted as the Democrats.