article

02.26.09

Here Comes Obamanomics

The president will deliver his budget today and with it a new philosophy. Former Clinton budget adviser Matt Miller asks: Can Obama convince Americans it’s a good idea to raise taxes?

Among other transformations, the Current Mess is about to forever alter the metaphors Americans use to make sense of political and economic life. Nowhere is this truer than with the federal budget, which, as President Obama reminded us the other night, represents more than just numbers, but “a vision for America.”

From the Reagan ascension until recently, the most trenchant description of the prevailing vision was “Starve the Beast.” This idea, which originated with Milton Friedman, held that the shrewdest way to restrain the supposed runaway growth of evil (and thus “beastly”) government was to cut taxes perennially. Combined with the fact that politicians had little interest in cutting popular government programs, this starvation would, by design, create big budget deficits.

Americans will, over time, come to realize that the government we want is actually worth paying for.

The hope was that pressure to do something about spiraling debt would eventually force politicians to do the unnatural, and cut spending. Since the Republican desire to sound fiscally conservative turned out to be almost infinitely greater than the Republican desire to be fiscally conservative, the result was an unprecedented increase in the national debt, along with a fancy, Friedman-approved justification for running up more until the courage clicked in.

Like Godot, of course, that courage never arrived. Those of us who worked in Bill Clinton’s budget office thought we did a pretty good job cleaning up the mess we inherited, before the Florida debacle in 2000 gave the GOP a chance to play “Starve the Beast” for a decade more. But Clinton himself, who felt compelled after the GOP blowout in 1994 to declare that “the era of big government is over,” never really slipped the spiritual straitjacket off “Starve the Beast” in the first place.

With President Obama’s first budget we are therefore embarking on an epic new paradigm which deserves its own metaphor. Though it’s a little clunky, for symmetry’s sake we may as well call it “Feed the Beauty.”

In fiscal terms, the failed wager of “Starve the Beast” was that spending would eventually shrink to come in line with lower taxes. The tacit wager of "Feed the Beauty" is that taxes will eventually rise to come in line with higher spending. Why? Because Americans will, over time, come to realize that the government we want is actually worth paying for (as opposed to having our children borrow money from the Chinese to pay for it, the de facto “plan.”) The paradox of this revolution in governing philosophy is that its success relies on the same underlying political dynamic. Instead of fiscal sanity depending on pols doing something the American people won’t like (cutting popular programs), it will now depend on pols doing something the American people won’t like (raising taxes).

Now, to be sure, beyond the expiration of the Bush tax cuts for the top, and some controversial new levies on those making more than $250,000 a year, Obama isn’t coming clean on this yet. But this higher-tax blueprint is plain enough—indeed, it existed long before Obama decided to seek the White House. Yes, the feds are throwing trillions of dollars in various ways at the recession right now. And yes, Obama’s new budget devotes fresh trillions over time to priorities he laid out Tuesday night in energy, health care and education.

But before all that, there was always the big Kahuna: the baby boomers’ retirement. Put aside Obama’s near-term recession fighting and long-term growth initiatives. The fact that we’ll shortly be doubling the number of seniors on Social Security and Medicare already means that taxes will inevitably rise in the decade after this recession is past. Even China won’t lend us enough dough to cover the $50 trillion in unfunded promises in our retirement programs.

By pushing ahead with universal health care, green-energy efforts, fresh funding for cancer cures, and a new drive to boost student achievement, Obama’s strategy is to make sure that broader tax increases on folks below $250,000, when they must inevitably be discussed (in a second term), are buying public goods that renew the economy in ways that benefit all Americans, not just the elderly. By making government beautiful enough to more of us, in other words, we’ll grumble less when it comes time to feed it.

My own sense is that, unlike "Starve the Beast," "Feed the Beauty" will actually work. (If it doesn’t, we’re pretty much out of options). And the good news is that when it comes time to "Feed the Beauty," we won’t become France or Sweden, as conservatives misleadingly allege. Depending on how you count the emergency outlays for the banking system, today America is spending and taxing in the middle 30s as a percentage of GDP. Western Europe and Scandinavia are around 50 percent. In short, there’s plenty of room for us to "Feed the Beauty" and still remain more of a rough-tough “cowboy economy” than some cradle-to-grave nanny state. But those are metaphors for another day.

Matt Miller, a former senior adviser in the Clinton Office of Management and Budget, is a senior fellow at the Center for American Progress, and the author of The Tyranny of Dead Ideas: Letting Go of the Old Ways of Thinking to Unleash a New Prosperity. He hosts “Left, Right & Center,” public radio’s weekly political roundtable, and blogs at mattmilleronline.com.