You are on page 1of 2

Gary Hart: How to Really Fix the Next Debt Crisis

By Gary Hart As the Senate votes on a dramatic deficit-reduction deal, we asked two former Senators influential ones on matters of finance, and members of the Esquire Commission to Balance the Federal Budget for their take. Herewith, a view from the left. Click here for Sen. Bob Packwood on the debt ceiling. There are two characteristics of the adolescent mind: It repeats its mistakes, and it cannot resolve irreconcilable choices. The United States of America is now much too old to act in an adolescent fashion, so the only real value that the debt-ceiling crisis has to offer is in the lessons learned. How did this happen? Five reasons stand out: We fought two long wars without raising revenues the dreaded "t" word. Even worse, we cut taxes while dramatically increasing military spending. We deregulated financial markets, and banks and investors manipulated the nation's economy into a catastrophe. These were conscious policy decisions. Then the baby boomers arrived on the social safety net's doorstep. And health-care costs skyrocketed. How do we prevent this from happening in the future? First, do not increase spending dramatically on measures like war without financing them. You finance them by raising taxes. This lesson is therapeutic in two ways: It forces tax-paying citizens to decide whether an invasion really is necessary for our security. And it prevents deficits from soaring. Second, do not reduce taxes in the blind hope of stimulating investment. We have to reward investment by providing a tax break for it. That is to say, if a person or business saves or invests income, let them reduce their taxes. But the investment must be made first. Pretty elementary, you would think. But that is not what the "supply-side" experiment since the early 1980s has done. It cut taxes presuming or hoping people and businesses would save more or invest more. And there is no empirical data that shows that they have done so. The third lesson is not to remove tried and tested regulations from the financial industries, regulations that prevent them from destructive speculation, corner-cutting, manipulation of markets, and cut-throat greed. Licensed greed is bad enough; unlicensed greed is definitely not good, except perhaps for those with the gilded yachts.

Are any of these lessons all that new? Definitely not. We've been through all this before more than once and yet we persist in pursuing that definition of insanity which is, in repeating behavior, known to be destructive. It will turn out differently next time, we tell ourselves. There are two ways and only two ways to balance our books: reduce outlays and increase revenues. Those off even traditionally conservative charts now deny the latter. They resort to a pre-Franklin Roosevelt, pre-social safety net mentality that wishes to return us to the devil-takethe-hindmost society with granny in the house, the poor adrift, the unemployed out of luck, and the homeless homeless. We can do that. But it will not be America as we have known it for the better part of a century. (It goes almost without saying that these same ideologues were in favor of the three principal mistakes that got us into this.) Yes, we do have to bring Social Security, Medicare, and Medicaid into the twenty-first century. People are living and working longer. Demographics as well as economics require us to take these changes into account in reforming not destroying the safety net of a civilized society. There is agreement on this. But the defenders those who insist upon maintaining these core commitments are demanding that the wealthy pay a fairer share. And that's the last thing: It's not a "tax increase" when you aloow a "temporary" tax cut to terminate under its own statutory terms. It is a resumption of the status quo before the failure of the "supply-side" experiment. Even Ayn Rand would understand that. -Gary Hart served as a United States Senator (D-Colo.) from 1975 to 1987, including time on the Senate Budget Committee and Armed Services Committee. He is now the Scholar in Residence at the University of Colorado, and chairs the American Security Project. http://www.esquire.com/blogs/politics/next-debt-crisis-6187266

You might also like