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Web Chat: Federal Budget and Debt Politics

William A. Galston

After a last minute deal averted a government shutdown on Friday night, attention now turns to competing federal budget plans. In a live web chat moderated by POLITICO, William Galston took your questions on budget and debt politics.

The transcript of this chat follows.

12:31 Seung Min Kim: Hi everyone. Bill Galston is here to talk with us on the latest budget wars in Washington and the politics behind them. Welcome, Bill.

12:31 [Comment From Erica: ] Do you think we’re out of the woods regarding a possible government shutdown?

12:32 Bill Galston: Although some Republicans and some Democrats will oppose the agreement, it is very likely to pass later this week. The leaders of both parties want to end this phase of the fight so that they can move on to the next one.

12:32 [Comment From Greg (MD): ] Do you think Congress will succeed at raising the debt ceiling? What’s at stake if they don’t?

12:34 Bill Galston: Yes, I do, because the consequences of not doing do would be grave. The debt is backed by the full faith and credit of the U.S. government. Trust in our capacity and willingness to honor our obligations is the linchpin, not only of our economy, but also of global economic stability.

12:34 [Comment From Troy: ] Is the budget fight really about the budget? Or are politics in other areas getting in the way of a successful resolution?

12:35 Bill Galston: Of course there’s a political dimension to the budget fight. But there are important substantive disagreements as well, not only about numbers and programs, but about the size, scope, and role of government in the next generation.

12:35 [Comment From Bret: ] Who do you think best understands the seriousness of the deficit and is likely to do something about it?

12:37 Bill Galston: My sense is that many more leaders and average citizens are aware of the seriousness of the problem than was the case even a few years ago. Recently 64 senators–32 from each party–signed a letter to President Obama urging him to support the approached his own fiscal commission. I’m more optimistic than I was last year that we’re beginning to come to grips with this issue as a country. But we all have a long way to go.

12:38 [Comment From Collin V.: ] Do you consider the Tea Party congress people to be troublemakers on the budget issue?

12:39 Bill Galston: I disagree profoundly with the Tea Party approach to the budget. Having said that, most people who associate themselves with that orientation sincerely believe that we’re on the wrong track and that a fundamental–not incremental–change of course is essential.

12:39 Seung Min Kim: I have a question. President Obama will give a speech shortly after this chat on deficit reduction — what does he need to lay out in his plan to make it a credible deficit-reduction plan?

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12:41 Bill Galston: The president’s speech must go beyond a vision and generalities; it must include specific numerical targets and programmatic proposals. Anything less would lead to disappointment and a loss of credibility. I’m sure the White House understands this expectation and will meet it.

12:41 [Comment From Drew: ] There was an interesting article on Slate this morning about a “Do Nothing” approach to balancing the budget. What do you think of a scenario where all the major players in the budget debate step back and let current legislation – expiring the Bush tax cuts and the Affordable Care Act – take effect, helping to close the budget gap?

12:44 Bill Galston: It’s true that allowing the Bush tax cuts to expire would close a substantial portion of the long-term deficit (I’ve seen an estimate of 40 percent). But remember that during his 2008 campaign, candidate Obama promised that taxes would not be increased for the bottom 95 percent of the American people. So allowing all the Bush tax cuts to expire–for the middle class as well as the wealthy–would be regarded as a breach of faith. The President is in something of a bind.

12:45 [Comment From Bill in Va.: ] Why is the concept of raising marginal tax rates (aka letting Bush tax cuts expire) on the small % of the very wealthy such a hard concept for Americans to swallow, or is it just that GOP members demagogue on it so successfully?

12:46 Bill Galston: It’s not so hard for them to swallow, actually. All the surveys I’ve seen suggest strong majority support (in the neighborhood of 60 percent) for allowing the Bush cuts for the wealthy to expire. It’s when you include the middle class that things get sticky in a hurry.

12:46 [Comment From Hank: ] Is there something specific Obama needs to do that he hasn’t done yet to get people in line to solve the budget problem?

12:49 Bill Galston: Specific? Yes, in a sense. Leaders of both parties have mislead the American people about our actual fiscal circumstances and choices. The people need to be brought into this conversation. They deserve specific, credible descriptions of how we’re now spending their money and what the consequences of different options for reform would be. As long as they believe that the problem is waste, fraud, and abuse plus foreign aid and assistance to lazy people, we’re stuck.

12:50 [Comment From David: ] Do you think there is traction to reform the tax code as suggested by the fiscal commission?

12:51 Bill Galston: Yes, I do. I detect substantial support in both political parties for the proposition that our current code is shot through with unjustifiable preferences and loopholes that distort economic decisions, decrease growth, and undermine public confidence. We addressed these problems in the 1986 tax reform act, and we can do it again if we put our minds to it.

12:52 [Comment From Jon: ] What do you think is the chance of reforming the fee for service incentives that drive health care costs up way above CPI for business, the consumer and government? ACA tinkers around the edges with such incentives, through non-mandatory ACOs and so forth. Even the small step that Senator Wyden had inserted into ACA to empower certain consumers by requiring employers to offer a choice of competing insurers was stripped out of the Friday night 2011 budget deal.

12:53 Bill Galston: Good question. It won’t be easy, but most health policy experts believe that such reforms are essential. The ACA includes some pilot programs, but we’re going to need systematic changes to bring costs under control.

12:53 [Comment From Wes: ] Nobody wants to pay higher taxes. But at some point, don’t you think that is a basic change that’s going to have to happen? It seems pretty straightforward to me. The government needs more money, and taxes is how they get it. Simple math.

12:56 Bill Galston: In the long run, we can’t have more government than we’re willing to pay for. We can’t raise taxes on the rich enough to fund our current commitments over the coming generation. So we’re going to have to make a choice: either we cut programs a lot, or we reduce the cuts by reaching deeper into our collective pockets. George Bernard Shaw once remarked that democracy is the only form of government in which the people get precisely what they deserve, and I agree with him.

12:56 Seung Min Kim: And that’s it for today. Thanks to our readers for their great questions and especially to Bill for his insightful answers.

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