Instead of playing a game of political chicken with Obama, the Republican leadership should grab the high ground and focus everyone’s attention on the big picture. Everyone knows the debt ceiling must be raised. The question is not whether it will peak at 15 or 16 trillion dollars-the cold reality is that it will be a much higher number. The GOP should not get trapped into negotiating around such a puny issue. They need to move the focus on the bigger, more important concerns. The health of the economy and the debt rating hinge on Washington’s ability to change the trajectory of government spending and the debt it generates. Under Obama, spending as a share of GDP has jumped 25% while revenues have dropped, as they always do, due to the deep recession. Current debt is virtually irrelevant when compared to the unfunded entitlement liabilities that exceed $100 TRILLION.
The only way to solve this problem, which was decades in the making, is with a long-term plan that will transcend the 2 year election cycle. The GOP needs to reject the static scoring that puts a price tag on lower tax rates. The Laffer curve demonstrates that the presumed correlations do not exist. Alan Reynolds recently authored a piece in the Wall Street Journal accompanied by a chart showing income tax revenue as a share of GDP as the top marginal rate was lowered from 91% to 28%. Revenues rose as a raw number and a percentage. (More on that here: LINK)
The silver lining in the current economic cloud is that the Democrats with their super majorities were able to give their economic theories a thorough test. The failure is also thorough and evident. The so-called “stimulus” was neither targeted nor temporary. The Democrats are trying to use it as a new baseline for budgeting. The crown for the party of big spending is properly placed once again. The GOP needs to claim victory and move on. The 2010 mid-term elections are their mandate.
This is our moment. We must seize it. Promises have been made for decades that can never be kept. The age of unfunded liabilities is over. True entitlement reform must include a transition to private accounts so that congress can never again spend what should have been in the mythical trust fund. Our health care is our responsibility. It is not a right-it is a basic necessity, just like food and housing-other areas where government meddling wreaks havoc. Insurance is a risk management tool that adds a layer of bureaucracy and the associated costs. It should be used sparingly, and will be, once it is untangled from the insane tax code.
A vibrant, growing economy can eventually dwarf the debt figures and then we can pay it off entirely. A rational energy policy focused on domestic drilling and proven technologies must replace the “green” fantasy. Real jobs will produce real revenue and help slay the inflation dragon that has already brought us $4 gas. Gains in national security are achieved as well. This message, this vision, can clarify the ongoing debate and serve as a national platform for the 2012 elections.