Believe It Or Not: The Budget Process Is Working, Rob Portman's Game-Changing Statement

Bipartisan Gridlock Is Striking the Right Balance
To the casual observer and most members of the mainstream media, or political system looks an utter mess as it relates to the federal budget.  In the past two years, we have almost shut the government down just to agree to pay our bills, we have gone down to the wire to agree to a tax policy for this year and we have implemented across-the-board spending cuts without rhyme or reason and trade-offs of government programs.

Taking a step back, while the process is certainly not working perfectly, the split control of the budgeting process between House Republicans and the President is producing positive results.

First, let's think about the deficit.  The only modern role model for a balanced budget that we have is during the Clinton administration.  During that time period, spending averaged between 19% and 20% of GDP and taxation also averaged between 19% and 20% of GDP.  The tax side was achieved through the 1993 tax hikes, which included an increased gas tax and increased income taxes, including the creating of a 39.6% bracket for those making over $250K.  The revenue side was contained by cuts to defense and welfare reforms, as well as a booming economy that led to low costs of things like unemployment benefits.

Fast forward to 2011.  Revenues had fallen to 15.4% of GDP, a Post-World War 2 low.  This was a combination of the Bush tax cuts and the Obama payroll tax cuts, which created historically low tax rates and, through various exemptions and deductions, excluded a large percentage of the tax base.  Spending, meanwhile, had grown to 24.1% of GDP, increased by heightened military spending, new Medicare drug benefits, extended unemployment benefits, homeland security spending and growing entitlement costs as boomers retired (Obama's stimulus package and Bush's TARP program had both largely concluded their costs by this point.)  Essentially, up 4-5% of GDP in spending, down 4-5% of GDP in revenue from when we were in balance.

Those of us who would take a rational, fact-based approach, would say that we clearly had a problem of wanting the government to do a whole bunch of new things (drug benefits, wars) combined with more expensive existing things (Medicare, Social Security) while paying less for them.  Not a sustainable path.  The obvious path would be to try to get back to Clinton-era levels of taxation and revenue.  That sounds easy but isn't - we were still entangled in Iraq and Afghanistan, entitlements were  going to inherently be more expensive if nothing systemic was done and people had reset the baseline in their mind and would consider Clinton-era rates a massive "tax hike".

The gridlock in 2011, while walking on the edge of a knife, produced a spending agreement that substantially reduced federal discretionary spending out of the gate and produced the sequester.  The recent fight between the President and congress produced higher tax rates, both a repeal of the Obama payroll tax cut and a partial repeal of the Bush tax cuts for higher earners.  The sequester further reduced spending.

So what has happened?  The 2013 budget year, which runs October 2012 - September 2013 paints an incomplete picture as the changes are only partially implemented (the tax hikes will only be effective for 9 of the 12 months and the sequester spending cuts for only 7 of the 12 months.)  Even so, in fiscal 2013, revenues have risen to 17.8% of GDP and spending has fallen to 23.3% of GDP.  Next year, revenues will further rise to 18.7% of GDP and spending will further fall to 22.6% of GDP, leaving a deficit of only 3.9% of GDP, versus the 2011 level of 8.7% of GDP.

In other words, the range of budget fights have increased taxes by 3.3% of GDP and cut spending by 1.5% of GDP.  That's fairly balanced, although there is clearly more work to do.  The big area of spending opportunity is clearly entitlements, which to-date have been untouched.  There are also still large opportunities in the defense budget, which is still running way above 1990s era levels.

But what about the arbitrary nature of the spending cuts?  While there has been a lot of hand-wringing over the across-the-board nature of the cuts, this is not that different from what happens in private industry all the time.  If you work in a private corporation, have you ever experienced a travel ban or a freeze on all raises?  These are private sector examples of exactly the same behavior - it may not be the most precies way to cut spending, but it is simple to implement and allows each department manager to make trade-offs within the budget that they know the best.  The sequester isn't a bad thing in this regard.

We are making progress on the budget.  But Congress and the President must be willing to make some uncomfortable choices about entitlements over the next few years.  Entitlements are sucking up more and more federal money as the population ages and Medicare inflation continues to rise.

Rob Portman: Late to the Party, But Right
Rob Portman's revelation that he has a gay son and that he has come to support gay marriage is courageous for a man who is viewed as a leading elected conservative.  His personal story of coming to understand his son's orientation and reconciling it with his previous held religious and social beliefs is insightful and touching.

Portman may be late to the party, but to his credit, he is but a few months President Obama in coming around.

What is most fascinating to me about Portman's shift is that there isn't much anger among prominent conservatives on the issue.  While there are still screaming so-called "values voters", more and more young conservatives are embracing the notion of the GOP as the party of liberty and realize that embracing that notion means providing liberty to everyone, not just straight people.

While I could criticize Portman for not coming forward with these views last year when he was a contender for the VP spot, I could make the same criticism of President Obama for not supporting this view in 2008, when gay marriage support would have been a clearer political negative.

I welcome Rob Portman to the fold of those fighting for marriage equality and hope more conservatives follow his and Dick Cheney's lead on this issue.

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