More important, lower deficits are a temporary phenomenon. According to the Congressional Budget Office, deficits will start increasing again in 2016. By 2023, they will be back up to almost $900 billion, and our gross federal debt will have risen to $25.23 trillion.
Republicans may be divided and demoralized right now, but they cannot afford to throw in the budgetary towel. As the debate moves forward, Republicans must hold the line in several key areas.
Save the sequester: The Democrats’ reverence for “settled law” evaporates when it comes to the sequester, a law duly passed by bipartisan majorities in both houses of Congress and signed by the president. Repealing the sequester’s mandated spending cuts is likely to be the Democrats’ No. 1 priority in budget negotiations. Already, Obama has promised to “keep fighting to get rid of” the law, saying it’s “hurting our military and our economy.”
Moreover, Democrats may find allies in this fight among Republican defense hawks, who object to cuts in military spending. John McCain, for example, has said that “some of us Republicans and Democrats are meeting about” undoing the law, “particularly those who are deeply concerned about the effect on defense.”
Some Republicans have other priorities: Even Paul Ryan has suggested that he might be willing to trade sequester changes for promises of future entitlement cuts.
We should be clear: The sequester hasn’t actually cut spending. Even if we preserve it, spending in 2023 will still be higher than it is today. But it has reduced spending growth well below previously projected baselines. In fact, without the sequester, discretionary spending will be $87 billion higher in 2023 than it’s projected to be with the law still in effect. The sequester will ultimately save taxpayers some $1.1 trillion over ten years, through lower discretionary spending and reduced interest payments. By slowing the growth of spending to a rate that’s below the growth of the economy and revenues, the sequester is helping to shrink both the deficit and the size of government as a share of GDP.
Across-the-board cuts may not be the most elegant method of budgeting — and some greater interagency budget flexibility may be desirable — but reversing or weakening the sequester will open the floodgates to much more federal spending. Republicans must fight to preserve it.
Hold the line on taxes: Already the president is back to talking about the need to include additional revenues in any budget agreement, a so-called balanced deal that, for instance, “closes corporate tax loopholes that don’t help create jobs.”
It should be recalled that the president got a ten-year, $617 billion tax increase as part of last January’s fiscal-cliff deal and that Obamacare includes $1.2 trillion in new taxes over the next ten years. That’s a total of $1.8 trillion in taxes he’s already won.
In fact, the Congressional Budget Office estimates that revenue will reach 18.6 percent of GDP by 2015, the highest level since 2001 and slightly above the post-war average. Washington has a spending problem, not a revenue problem.
Even that bastion of establishment liberalism the Washington Post opposes tax hikes as part of this deal, editorializing: