In the March 26, 2013 edition of the Wall Street Journal, the nonpartisan columnist Gerald Seib makes a very astute observation, namely that “Liberals Face Spending Dilemma”. The Republicans are beating the drums for a balanced budget, the economy is growing at the anemic rate of 2% per year and entitlement spending is growing much more rapidly than this. So what is going to happen? Discretionary spending is going to have to shrink! This means a big hit for both defense and nondefense discretionary spending, meaning most of the traditional programs funded by the federal government.
How do we get out of this predicament? The best way would be to make the economy grow faster but this is unlikely to happen while the Democrats control the executive branch and are unwilling to implement pro-growth policies such as tax reform, deregulation and stepped-up international trade.
But even with more business friendly pro-growth policies, entitlement spending is growing way too fast and eating up a larger and larger piece of tax revenues. The Republicans want to control the costs of Social Security, Medicare and Medicaid but simply cannot get this done without Democratic cooperation and support. Either Democrats help figure out how to make significant cost cutting changes to entitlements or else steep cuts in discretionary social spending will have to be made.
The Republican drive to rapidly shrink deficit spending down to zero is for real and will not be denied. The sooner the big spending liberals figure this out and adjust their behavior, the better off will be the whole country.