There's No Such Thing As Deficit Reform Without Pain

Jim Manzi thinks that we're too quick to assume that budget solutions we find unpalatable will be just as repulsive to the voting public:

I was at a dinner last year with about 15 well-known Washington think tankers, academics, journalists, bloggers and budget experts, entirely focused on the question of where on this spectrum we will end up. What was so striking to me is that as we went around the table, the majority of these people asserted confidently what would be politically feasible or infeasible positions. Many of these equally confident-sounding assertions were contradictory, and not shockingly, tended to line up roughly with each speaker's political inclinations.

It would be simple for me as an economic conservative to dismiss the idea of a tax increase equal to an 80% increase in income taxes as politically unrealistic, but I'm not so sure about that. In the event of a crisis, I could easily imagine "emergency" income taxes on the "most fortunate among us" plus some increases in middle class tax rates, plus the introduction of a VAT, that got to something like that.

If you had asked me at a New Year's Eve party in 2006 what I thought the odds were of the U.S. government taking a controlling interest the largest bank, the largest car company and the largest insurance company in America, I would probably have laughed at you. Yet within 36 months, this is exactly what had happened.

My friends who are more liberal than I probably should not make the analogous mistake of imaging that benefit reductions that seem absurd politically right now might come to seem not so absurd, and surprisingly quickly.

You see this all the time in print: liberals pointing out how unpopular benefit cuts are, conservatives pointing out that no one wants their taxes increased. But of course, the correct question is "Compared to what?" Do people want their Social Security benefits enough to pay another 10% of their income into the program? Do they hate tax increases enough to give up Medicare?

I'm pretty sure that the final budget deal will involve some of each of the hated choices. Even if the public were willing to tolerate an all-cuts or all-hikes solution, the deal will have to be cut with an opposition party that will not give up so easily.

But which direction will the deal lean? That remains to be seen. One point to keep in mind, though: it's quite easy in theory for spending to exceed our taxing power. But tax revenue can't.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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