A ‘Debt Limit’ Compromise

by Richard A. Epstein (Peter and Kirsten Bedford Senior Fellow and member of the Property Rights, Freedom, and Prosperity Task Force)

Quotes and my responses to them:

• The whole matter has careened so far out of control that the abundant blame for this unfortunate impasse has to be shared on both sides of the aisle.  Response:  The problem is Keynesianism.  As I understand it, Keynesianism is the doctrine of not paying debts.  This is what got us into this mess in the first place.
• Thus, although there is constant pressure on both sides of the aisle to cut defense spending, it seems that the current four percent of gross domestic product spent on defense is too low for a nation that faces dire threats around the world.  Response:  This country doesn't need to spend as much as it does on defense.  We are defending the world, which, in most cases, are just as well off as we are, and can afford their own defense.
• These programs have, by common consent, grown beyond sustainable levels.  Response:  This is a typical Republican talking point, but I am not typical.  All you have to do is open your eyes.  Social Security was running surpluses all these years.  Only recently has it begun to run deficits.  Other entitlements can be looked at, but not Social Security.  It isn't the problem.
• The appalling waste of both the Bush and especially the Obama stimulus programs was based on the fatal Keynesian presumption that it makes sense for the government to make expenditures that everyone would deem wasteful, even farcical, if undertaken by private parties.  Response: Now you're talking.
• On this view, Republican strategy to rail against all new taxes is a misguided negotiation position. Response:  Maybe so, but to give in on taxes on feeds the monster. 
• Toward that end they should accept some tax increases, but fight hard to tie those increases to a flattening of the tax rates and to the largest possible increase in spending cuts  Response:  I don't trust spending cuts because they can be taken back.  The only time I could support a tax increase is if there is a balanced budget amendment.