A Time for Radical Centrists

Originally published in The New York Times

April 26, 2011
Edward Glaeser (Glimp Professor of Economics, Harvard University)

It has been a bad decade for the gross federal debt, which has ballooned to 93.2 percent of gross domestic product in 2010 from 56.4 percent in 2001. Wars and recession have taken their toll, and last week Standard & Poor’s warned that the United States was in danger of losing its AAA rating.
Is it any wonder that 70 percent of Americans think the country is on the wrong track?
Our best hope is that the collision between the Tea Party and the Obama administration will explode into some serious centrism. Just as the strange cocktail of Bill Clinton and Newt Gingrich produced welfare reform in 1996 and a significant decline in the gross debt, to 57 percent of G.D.P. from 67 percent, the political conflict between President Obama and the Republican-controlled House seems to have created some fiscal seriousness from both parties.
Political energy rarely comes from middle. It’s easy to understand why millions of Americans could get passionate about the more generous, more just country offered by progressives from Theodore Roosevelt onward. It’s also easy to understand the passionate desire for freedom that inspired the original Tea Party and its current incarnation.
But currently, our nation needs something that doesn’t conjure a crowd so readily: common sense. We need the spirit of nation-building centrists, like Washington and Eisenhower. We need the middle way described in the Bowles-Simpson budget plan, but that middle way needs to tear off the green-eyeshade approach to budgeting and wrap itself in red, white and blue, for it is America’s best hope.
Neither the Republicans nor the Democrats have asked the American public to sacrifice much lately. We’ve fought wars without raising taxes and fought recession by doling out public funds. In both cases, the decisions were understandable, but the debt won’t come under control without sacrifices all around.
The left must be willing to restrain its appetite for vast entitlement spending. Social Security and Medicare, along with the military, are the elephants in the budget, and they all need to lose a little weight. Cutting Social Security spending is relatively straightforward – we only need to increase retirement ages.
Cutting Medicare and Medicaid is the hard part.
Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, has proposed an innovative voucher-type plan for Medicare. Opponents of the Ryan plan assert that recent history shows that a market-based system won’t cut costs – but we haven’t actually been living in a truly private system.
We now have a system with private providers who face incentives to maximize profits and a relatively unlimited public willingness to pay. Our current mixed system is certainly no true market system, and it is practically guaranteed to lead to rising costs.
The Ryan system can cap costs by limiting public payments, but it is tough medicine. It cannot guarantee to deliver decent health care for every older American, especially in geographic areas where the number of health-care providers is likely to remain low. It will pass costs along to families, which will challenge many middle-income Americans.
Republicans are going to need to be more generous, and Democrats will need to accept that some medical care is just too expensive for taxpayers to cover. Welfare reform in 1996 provides a model of the type of bipartisan effort we need in health care.
The right must compromise on tax increases. I like low taxes as much as the next taxpayer, but America won’t find fiscal responsibility without more revenues. Republicans can’t expect the Democrats to compromise on entitlements unless they are willing to compromise on taxes.
The G.O.P. is itself responsible for some of the government’s most expensive undertakings, like our wars in Afghanistan and Iraq, and it should accept some higher taxes to pay for those wars.
The most politically palatable and economically sensible way to get more tax revenues would be a widespread tax overhaul, along the model of the bipartisan Tax Reform Act of 1986. Wholesale reform would provide a great opportunity to rethink aspects of the tax code, like the home-mortgage-interest deduction, that reduce revenues and distort behavior.
The Bowles-Simpson budget plan sensibly argued for widening the tax base while keeping the marginal tax rate as low as possible.
Congress also needs to suffer so that less government spending will go further. It must adopt a more technocratic, less political, approach to budgeting. Earmarks provide particularly egregious examples of federal expenditures with high costs relative to benefits, and they certainly need to go, but Congress should tie its own hands even tighter.
This would be a great time for Congress to embrace the principle that spending and regulations need to pass through a cost-benefit analysis gantlet that rigorously analyzes every Congressional action. This means giving the Congressional Budget Office more resources – but that is money well spent.
Budget-cutting Republicans should rush to institutionalize self-binding spending constraints now to limit future sessions of Congress. My preference would be both to expand the existing C.B.O. and create a shadow C.B.O., with a director appointed by the minority party and empowered to critique the reports of the main budget office.
We also need more scrutiny of discretionary military spending. Cost-benefit analysis is harder in national security, but even in that area, there have been complaints for decades that legislators have pushed pet military projects that yielded relatively low returns.
Given the vast size of our military budget, Congress needs better independent evaluation that raises red flags whenever new spending seems wasteful.
Both Democrats and Republicans have made choices over the last decade that have significantly expanded our national debt. Each of those choices may have been understandable after an awful attack on American soil or a terrible recession, but now we have to pay for those choices.
This is no time for liberal or conservative extremism – we need some radical centrists ready to fight for fiscal responsibility and more cost-effective public spending.