In the 19th century historian Thomas Carlyle gave economics its now-famous label of the “the dismal science.” Indeed, his writings went even further, labeling the discipline a “dreary, desolate and, indeed, quite abject and distressing [science].” The reason was simple – economics is the study of trade-offs, given scarce resources how do individuals maximize their wellbeing. It’s a study of why we can’t have everything we want.
Budgeting rests on largely the same principle. The federal government has a finite amount of income which it must use to finance a certain amount of expenditures. For the past several years the idea of trade-offs has gone out the window. Democrats in Washington have thrown out the rule of scarcity and acted as if they can spend however much money they pleased on whatever it is they wanted to buy.
That can’t happen forever. Or if it can we’ll have to rewrite a lot of economics textbooks and certainly find a new name for it than the “dismal science.”
Rep. Paul Ryan’s “Path to Prosperity” budget is a study in trade-offs. Ryan’s plan reduces taxes across the board and eliminates the deficit being handed to generations and can achieve that by slowing the growth of government expenditures and paring back the role of the welfare state.
“We think Americans should control their destinies and we trust them to make the right choice about the future of our country,” said Rep. Ryan. “We are offering the nation a choice. We are offering the nation a better way forward. And we are offering the nation a plan to renew American and the American Idea.”
It may not be ideal, but Rep. Ryan’s plan is at least honest in the trade-offs it makes.
The Democrats’ budget? Not so much.
To be fair, the Democrats’ budget gets us closer to balance than Obama’s budget, although not by much. The budget adds $6 trillion to deficits over 10 years rather than $6.4 trillion in Obama’s plan. That’s hardly enough to give our creditors or the bond rating agencies confidence in our long term trajectory.
Indeed, the Democrats’ plan envisions spending growing from $3.7 trillion in FY 2013 to $5.5 trillion by 2022, continuing the historic expansion of government we’ve seen in Obama’s first term. Moreover, it “pays” for some of this by hiking taxes $2.4 trillion over 10 years with not even a hint of fundamental reform. In fact, it doesn’t reform anything. Medicare, Medicaid, the tax code, and Social Security are all left to grow more and more unsustainable by the year.
Sadly, many Democrats in Congress don’t even think this tragic vision for America’s future goes far enough to raise taxes and increase spending.
The Congressional Progressive Caucus issued a stark vision for America’s future by presenting a budget chocked full of higher taxes for everyone.
As James Pethokoukis describes in The American the plan relies on “just about every sort of tax increase imaginable.” It adds five new tax brackets, would introduce a “wealth tax,” a bank tax, a carbon tax and a financial transaction tax. It would also slam the middle class by allowing the 28 percent and 25 percent tax brackets to sunset. All told the plan envisions government revenue reaching 22.6 percent of GDP – a nearly 40 percent increase from current levels and a far higher percentage than the 18 percent post-war average.
The Congressional Black Caucus also plans on introducing a budget that will follow a similar model of enormous tax increases couples with historic spending increases. “In 2013 alone, the plan will devote $153 billion more than Obama’s budget to domestic discretionary programs like Pell grants and NASA,” writes Mike Lillis and Erik Waasson in The Hill. “Over 10 years, that figure rises to $594 billion.”
Economics may be a dismal science, but it’s rules can’t be ignored. In a world of scarce resources trade-offs must be made, even if they require difficult decisions on the part of leaders. Currently, only one party is leveling with Americans in presenting a budget that makes sensible, if hard, choices about the role of government. Given the choices it shouldn’t be hard to figure out which party that is.