Can the Leopard

Change Its Spots?

By Paul Kendall

Our presidential primary system is a marvel among democracies, a national treasure that both fascinates and baffles the rest of the world. But do its debates assure us their promised new direction? Not if they remain focused upon who did or did not vote for the Iraq War instead of focusing upon taxes and the federal budget.

The federal budget, not campaign press releases, is the litmus paper upon which real change will be measured. Until there is new thinking on defense appropriations, entitlement programs, infrastructure investment, deficit spending, and taxes there will be no new direction. Entrenched interests and the public sentiment supporting those interests will thwart it at every turn.

Despite the fact that the national budget is running at an annual deficit of between one-quarter and one-half a trillion dollars and that the accumulated debt is now about nine trillion dollars, there has been no meaningful discussion of our fiscal health and of the hard choices that lay ahead. Expecting the presidential candidates, or Congress, or the general public to seriously consider these issues, however, is almost like believing that the proverbial leopard can change its spots.

Instead of confronting our Congressional delegation over the protection of defense-related jobs and contracts, the public is engaged in a relatively fruitless argument over earmarks and Iraq spending. Instead of a debate over the mission of our military, policy experts tell us that spending 4% of our Gross Domestic Product on defense is at the low end of an historic range for such expenditures. Instead of restructuring our nation´s health delivery system and prioritizing its expenditures, there are new proposals for expanding that system and range of services almost regardless of cost. And instead of repaying the debt to the Social Security Trust Fund, we hear obfuscation of facts and witness ideological gridlock.

A strong defense, an efficient, public health-care delivery system, and well-funded retirement programs are all vitally important for our country, but given the entrenched interests surrounding each of them, a new direction for any of them will probably require spending more rather than less. So too will replacing our nation´s antiquated, vulnerable, and uncompetitive communication, electrical transmission, transportation, flood control, and educational systems

The easiest and most likely political solution is to continue running budgetary deficits. And certainly during the Bush administration deficit spending has become the preferred solution in Washington. It is the most probable future scenario as well, because we, as a nation, have a phobia against raising taxes.

None of the presidential candidates seem concerned that such a pattern of debt financing potentially weakens our country by placing more control of our economy in the hands of our competitors and possibly some adversaries, like Europe, India, Japan, China, and potentially Russia. To the extent that they mention the deficit problem at all, the candidates focus upon achieving unspecified cost savings, cutting agricultural subsidies, eliminating waste, fat and fraud, reducing earmarks, or rescinding tax relief to the top 5% of tax payers. All these are important, but they are small potatoes and do not come close either to matching the need for additional funding or to eliminating the deficit. Increased taxes, therefore, must also be a part of any new direction.

To even suggest a tax increase, especially on any part of the middle class, however, is to touch the third rail of electoral politics. Despite the fact that U.S. citizens are among the least taxed in the developed world, we believe that we are still paying too much. So instead of squarely facing the issue of inadequate revenues, our leaders and presidential candidates continue to propose financial gimmicks and to promise new programs, more deficit-producing rebates, tax credits, subsidies, and exemptions from the Alternative Minimum Tax.

With this public attitude towards taxes and with the entrenched special-interest groups around defense and entitlement spending, it is easy to understand why presidential candidates do not wish to discuss financial issues and awaken the budgetary leopard. When aroused, that beast bites, claws, and mauls more than it purrs. But without prying the spots off that cat it is hard to imagine how any president will be able to move our nation beyond a change in style, tone, and patronage to a substantive change in direction.

What could shake-up the status quo would be some kind of economic crisis, such as a significantly plunging dollar. The resulting inflation, with its consequent loss both of consumer purchasing power at home and of government influence abroad, might stimulate the public to reconsider its self-interest and to prioritize fiscal prudence, strategic superiority, and infrastructure investment over financial profligacy, military omnipresence, and personal consumption. Such an event might then enable our leaders to reorder fiscal priorities and to raise taxes. Then again, it might only encourage them to recommend more tax cuts, subsidies, rebates, and deficits.