The sorry Republican record on fiscal matters is not merely a morality tale. When the conservative party and democracy embraces “starve the beast” on taxing and “feed the beast” on spending, then fiscal governance breaks down badly; you end up with two free-lunch parties competing for the affections of the electorate, alternately depleting the revenue base and then pumping up the spending.
Needless to say, this outcome bespeaks irony. Milton Friedman was an unrelenting foe of big government and the American welfare state, yet the global monetary contraption he inspired assured its perpetuation. Consider, for example, how the two-party free-lunch competition has perverted the basic budgeting process. Here, the basic tool of long-term fiscal policy, the so-called 10-year budget projection, has been utterly corrupted by the need of both parties to disguise the full measure of their profligacy. The most recent CBO baseline, for example, shows the federal deficit declining from 11 percent of GDP this year to 3 percent by 2015, a trend which looks like progress. Unfortunately, this baseline outlook is now useless as it is riddled with fiscal booby traps, as I call them, in the form of major costly entitlement and tax law provisions that expire in an arbitrary cliff-wise fashion one, two or three years down the road.