Michael Grunwald is senior national correspondent for Time magazine and author of “The New New Deal: The Hidden Story of Change in the Obama Era.” His recent cover story, “One Nation Subsidized: How Big Government underwrites your life,” reported on how many subsidies and benefits his family — and others like them — get in everyday life. Points asked him to talk more about the idea that middle-class Americans are standing in the way of change.
The presidential candidates talk about helping the middle class. But after reading your Time piece, I was left thinking that the middle class is actually holding Washington back from getting the nation out of debt. Am I wrong here?
Well, the point of my story is that almost all of us are makers, and all of us are takers, but we’re proud of our making and blind to our taking.
The vast majority of our $3.5 trillion in annual federal spending goes to national defense, Social Security, Medicare and Medicaid, which is thought of as a program for the poor but also helps the disabled as well as middle-class residents of nursing homes.
There’s also $1.3 trillion in tax expenditures that predominantly reward middle-income and upper-income taxpayers for owning homes, receiving health benefits through their employers, saving money in 401(k) plans, hiring nannies and doing other things that they’d probably do without the incentives.
We have a debate over Big Government that’s almost entirely divorced from the reality of Big Government. For example: Our long-term fiscal problem is almost entirely a problem of rising health care costs. But it’s more fun to argue about Amtrak subsidies and tax breaks for corporate jets that may or may not make sense but aren’t dooming our future.
The list of subsidies and tax breaks is indeed staggering. And your piece notes how your family benefits, right down to the public tennis courts you play on. In essence, we are all Big Government, right?
Right! I think one of the takeaways from my article is that the right has a point about government trying to do too many things. Uncle Sam shouldn’t be shoveling our tax dollars to farmers, or building sprawl roads to nowhere, or promoting homeownership by letting me and Mitt Romney deduct our mortgage interest.
But the left has a point that we all rely on government a lot more than we realize. It puts out fires, picks up trash, inspects our food, educates our kids and subsidizes our water, electricity, housing, transportation, businesses and just about everything else we touch. It lets us write off dressage costs, too.
Yes, those dressage costs. Now, my wife may kill me here, but I’m willing to put up our mortgage deduction — or some of it, at least — in return for a simpler tax code and a leveling of the debt. I’d also be willing to end employer tax exemptions for health care so we can free up money to pay the debt, even though typing those words gives me the willies. Getting rid of that exemption would probably cost my family in higher health costs. But here are two I’m putting on the table. Any counteroffers from you over in Miami?
Personally, I think we should get rid of the entire home mortgage deduction, and just about all federal support for housing. I also think we should abolish federal support for agriculture; interestingly, when I asked liberal and conservative budget wonks the same question, they all started with farm subsidies. And I’d certainly get rid of the carried interest loophole and other welfare for multimillionaires.
I’m not a big fan of the deduction for charitable donations, either. In general, tax expenditures are a misguided way to dole out goodies. They make politicians feel like tax cutters rather than big spenders, but they’re incredibly regressive; the more expensive your house, and the higher your tax bracket, the more you benefit from the mortgage deduction.
I like the idea of capping deductions, which Romney floated. Ultimately, though, long-term fiscal sustainability will depend on health reform that rewards providers for delivering care rather than volume. Obamacare seems like a pretty decent start.
I like the idea about capping deductions, too. We each could get a certain dollar figure of deductions and then decide which to include under the cap. Could this get Washington off the dime?
Romney suggested he might be open to something like that. I would, too. But it would eliminate, for example, the deductibility of most charitable donations, since rich people make the biggest donations. That would be fine with me, but it wouldn’t be fine with churches or other charities, and ultimately I bet it wouldn’t be fine with Romney.
In general, Washington loves talking about spinach, but it tends to keep giving voters dessert. Look what happened when Obama tried to tackle entitlements by trimming $715 billion from Medicare providers; the supposed conservatives in the GOP have accused him of trying to kill Granny. While, of course, accusing him of refusing to tackle entitlements.
The politics is tough. People feel entitled to their entitlements.
Is another takeaway that change won’t come until we as Americans demand it? Come to think of it, that’s how things are supposed to work.
Hmm. I’m not sure about that.
I think most Americans are deluded about what our government does for us, which is one reason I wrote the article. You could say the undertone was: You didn’t build that. But we do like our goodies.
I think things will only change when our leaders have the courage to ignore us. And it sometimes happens. My book showed how Obama has driven a lot of under-the-radar change by playing an inside game; he might cut a long-term deficit deal simply because he thinks it’s the right thing to do.
It’s not as if the 1993 Clinton budget bill that helped eliminate the deficit was a response to popular demand for deficit reduction. This is a republic; the people have the power, but we transfer it to our elected officials. Sometimes they do bold things.