WSJ - Henninger

A Debt-Limit Election

What began as a technicality has become a metaphor for the stakes in 2012.

• By DANIEL HENNINGER

Democrats say they won't vote to raise the debt limit unless they get someone in the private sector to pay higher taxes. Republicans say they won't raise the debt limit unless they get reductions in public-sector spending without raising taxes. Shall we put this to a vote?
Not a vote of Congress, but of the American people—the 130 million or so who will vote for president in November 2012.
The debt-limit fight is being depicted as mostly a green-eyeshades funding technicality, dating back, not surprisingly, to 1939. It's bigger than that. When Congressman Paul Ryan says we have arrived at a "defining moment," this is what he means. The issues that have surfaced in the debt-limit struggle will—or should—define how this country's people see themselves for at least a generation.

What began as a technicality has become a metaphor for the stakes in 2012.

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The nation's total debt, now $14.29 trillion, is the cumulative result of budget deficits extending back at least 30 years. Republicans blame all this on "out-of-control spending." No, that debt is the product of our politics—of open elections and successive Congresses and presidencies, some of them Republican, sifting through all sorts of public wants, such as subsidized medical care for the elderly. Running alongside, the American people went to work every day and produced the tax revenue that enabled these wants to become history's biggest public budget.

This isn't just numbers. It's who we are and what we've become. Politics R Us. Now, after all these decades of politicking, the two parties have arrived at a $14 trillion debt limit. We are going to decide right here who we will be in the future.
Some part of the American people manifestly does not want to go further into what this debt represents. Some do want to go further. As always, we will work this out, not with tear gas in the streets, but through the two political parties. Independent voters, that great swath of Hamlets who never quite know what they want, will have to cast a vote in 2012 that matters beyond the next election cycle.
The way we watch these fights through the media suggests four guys named Obama, Boehner, Biden and McConnell will work something out, and the ship of state will groan forward. That's not quite true. This intractable debt fight is the result of opposed forces in the body politic more powerful than this foursome.

In November 2010, an anxious American public, stunned by the wreckage caused by the 2008 financial crisis, swept Republicans into power. Absent those political forces, it's likely a debt-limit increase, with Mickey Mouse taxes, already would have passed a status quo Congress with the Republicans waving some matador defense at the onrushing trillions. So far, that hasn't happened.
As to the Democrats, given the huge scale of the spending numbers beneath the debt-reduction talks, how to explain the mismatch of their piddling cats-and-dogs tax proposals, such as taxing private jets? For them, the negotiation's numbers are irrelevant. What matters is protecting the principle of raising taxes to pay for public spending in the future.

In the universe inhabited by this generation's Democrats, public spending is life and taxes are their oxygen. The party's base—progressives, unionists, liberal politicians, comedians—is furious over the Obama decision in December to extend the Bush tax rates. Now they're engulfed in the math of this spending-reduction nightmare with the safety valve of big taxes shut. 

The debt-limit debate has made explicit that the Democrats will address whatever debt and deficit concerns are agitating the public by matching an upward spending curve with a steadily rising stream of tax revenue. The Obama budgets have pushed spending to 24% of the nation's total output. The party's economists argue this is "normal" given the entitlement commitments to retiring baby boomers. This is what America wanted, they say. We gotta pay for it. A proposal this week by Sens. Joe Lieberman and Tom Coburn to cut Medicare spending by $600 billion—over 10 years—was virtually laughed out of the room by Harry Reid and Nancy Pelosi. What's ultimately at stake here may be found in the dry pages of the Congressional Budget Office's Long-Term Budget Outlook released this month. From 2022 through 2085, CBO projects annual GDP growth of 2.2%, and growth in real earnings per worker of 1.4%. For 63 years! In short: We become Europe.

To seal the Faustian entitlement bargain, we eventually cave and consent to higher taxes to "pay for" what we said we wanted through the politics of past decades. We concede the economic and eventually the military future to Asia. We entertain ourselves, like any slow-growth nation, by watching unemployed youth riot in the streets. Or we vote not to do it.


Given the stakes, any GOP presidential candidate who tries to pocket the nomination with no more argument than that the economy is all Obama's fault should be defeated. People are looking for a path forward, not some Republican version of hope and change.

The $14.2 trillion debt limit began as a Treasury technicality. It is now a metaphor for the 2012 election.

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