The New York Times, in a story on the US’s large projected deficits in today’s paper, writes:
For Mr. Obama and his successors, the effect of those projections is clear: Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors.
This isn’t true. As the Democrat’s health care reform bill — which was projected to lower the deficit — showed, it is quite possible to propose significant new domestic initiatives even within the limitations of a deficit. The big limitation is political, not fiscal.
There is certainly room to maneuver within the Federal budget, particularly if a particular law or program reduces expenditures somewhere else, or brings in its own revenue stream.
But the almost unprecedented level of deficit we’re entering does put major constraints on initiatives. Not only must they climb a budget-neutrality hill to not put an additional strain on the laboring federal machine, they must climb a psychological hill among people who think the government is doing too much already. That won’t be easy.
This graph is fairly informative as to why the political climate is so constrained.
http://www.cato-at-liberty.org/2010/02/01/five-decades-of-federal-spending/
Hm. I just blew up a lengthy response that bogged down the more I thought about it. Let’s get simple.
Designing a program to either increase or at least simply shift spending while remaining deficit neutral is far from simple, as the Senate and House health care bills show. As Robert points out, if you can’t do that you either have to increase taxes and other revenues or you have to cut spending elsewhere.
So, tell me this: in general, what do you mean by “fiscal problem” and “political problem”? And do you think that raising taxes specifically is a political problem, a fiscal problem or both?