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You Can Cut Spending and Still Get Re-elected: Stephen L. Carter

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Feb. 3 (Bloomberg) -- It’s depressing to watch the unfolding of yet another political season in which the parties are united in their determination to keep public attention away from the elephant in the room.

I refer to entitlement programs, the place the public’s money really goes, and the driver of the future spending and deficits that have Americans so justifiably terrified.

True, the refusal to discuss serious entitlement reform is a very old problem, and all the deficit panels, official and unofficial, that have proposed such changes wind up looking a bit like the actors in Eugene Ionesco’s absurdist masterpiece “The Bald Soprano”: When we reach the end of the play, we realize that everyone is going to shift chairs and roles and then start the story over again, line for line.

Conventional wisdom holds that entitlements are the third rail of American politics: Touch them and you die (or the political equivalent, which is to be voted out of office). Republicans and Democrats agree with this premise. But a recent paper from the National Bureau of Economic Research argues persuasively to the contrary.

It studies the relationship between deficit reduction and re-election (or reappointment) in the 19 nations, including the U.S., that have been members of the Organization for Economic Cooperation and Development from 1975 through 2008. The findings are unambiguous: Governments that choose to cut spending to close large fiscal deficits face no added risk of defeat in the next election.

Results Are In

The paper compares large changes to the government’s fiscal deficit (cyclically adjusted), in which the ratio of deficit to gross domestic product falls by at least 1.5 percentage points, and results of an election either during a period of deficit reduction or within two years of its end. The paper concedes that the factors that cause one government to fall and another to survive are always complex. Nevertheless, the data provide no support for the hypothesis that attacking deficits through spending cuts reduces likelihood of re-election. (On the other hand, consistent with earlier studies, it finds that using tax increases to reduce deficits has a slightly negative effect on the chances of re-election.)

Although there are many questions to be answered, the authors -- Alberto F. Alesina of Harvard University, Dorian Carloni of the University of California at Berkeley, and Giampaolo Lecce of Bocconi University in Milan -- are careful in their methodology. They test, and reject, the obvious competing hypothesis that governments that engage in fiscal austerity are already strong and survive for that reason. They offer a number of case studies, from very different economies, to buttress their conclusion.

If correct, their conclusion matters. Looming deficits in the U.S. promise nothing but trouble. As everybody knows, there’s a lot of money to be saved in entitlements. Indeed, that’s where all the big budget savings are, had we but leaders courageous enough to tackle them. Moreover, there are no secrets. Raising the Social Security retirement age by one year, to 68, would save $70 billion between now and 2030. Raising the age by two years would save almost a quarter of a trillion dollars. (All these data are drawn from the ever-helpful New York Times deficit reduction calculator.)

A hard cap on Medicare growth at GDP plus 1 percent would save over half a trillion dollars by 2030. (A hard cap means one that the Congress does not undo every year, as in its current silly practice, where members claim the savings one year and then yank them away the next. A hard cap would probably be easier to manage should Medicare be transformed into a health-insurance voucher program, but that isn’t politically possible.)

Unpopular Positions

None of this is mysterious. Yet none of it is popular, either. One side preaches that raising taxes on high earners will fix everything, while the other insists that with tax cuts, we can grow our way out of our mess. Neither party seems willing to make a serious attempt at cutting actual spending, particularly on entitlements, as witnessed by last year’s embarrassing failure of the deficit-reduction supercommittee.

Maybe the nonaccomplishment should have been expected. An important implication of the data presented in the paper is that achieving fiscal stability is harder in “more polarized political systems and fractionalized societies, where ‘deals’ and compromises are more difficult to reach quickly.” The authors therefore suggest that “political consolidation of a stable and secure cohesive majority may be a precondition for a fiscal consolidation.” If so, we may be in more trouble than we thought.

Yet the authors have done us an important service, inviting us to cast away the notion that voters will punish serious spending cuts. The question is whether our politicians will rise to the challenge. Alas, watching the battle for the Republican nomination unfold, one is reminded of the philosopher Michael Sandel’s comment on Bob Dole’s 1996 presidential campaign: Dole was making it too easy for Bill Clinton. Dole, Sandel wrote, absolved Clinton of the challenge “to rethink progressive politics or to grapple with the forces that, sooner or later, will transform American political debate.” Sandel’s point was that the Republicans never pressed the incumbent to deal with even the obvious flaws of the progressive vision -- a dialectical process by which progressive policies themselves might actually have been improved.

It was obvious even 16 years ago that entitlement growth was the great future challenge to U.S. fiscal health. But over the years, each party has made it too easy on the other. We constantly back away from serious conversation about Social Security or Medicare, except to accuse the other party of either gutting the programs or letting them explode the budget.

I am not suggesting that tax increases are always bad, or that spending cuts are always good. But the elephant remains in the room. The decision by both parties to ignore serious entitlement reform may well be good politics. But it’s hard to call it courageous, or leadership.

(Stephen L. Carter is a Bloomberg View columnist and a professor of law at Yale University. He is the author of “The Violence of Peace: America’s Wars in the Age of Obama,” and his next novel, “The Impeachment of Abraham Lincoln,” will be published in July. The opinions expressed are his own.)

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