Cleaning Up the Fiscal Mess

Panel discusses policy solutions, limitations in fighting the fiscal crisis

Norquist, Furchtgott-Roth, Shlaes, DeMuth
January 27, 2013

A quartet of conservative panelists looked at the challenges of being the minority party in a divided government during a Saturday afternoon panel at the National Review Institute Summit titled, "The Way Out of the Fiscal Mess."

"We actually know how to get out," said Christopher DeMuth, a scholar at the Hudson Institute.

He said long-term Medicare reforms as well as tax reform are needed to help the government escape the mounting fiscal crisis.

"We know for certain America is not going to do that," DeMuth said.

DeMuth was joined on stage by Amity Shlaes, director of the 4% Growth Project at the George W. Bush Institute, Diana Furchtgott-Roth, an economist at the Manhattan Institute, and Grover Norquist, president of Americans for Tax Reform.

There was a general consensus in the group that America should grow its way out of its mounting debt, although each individual brought a different focus to the discussion.

Furchtgott-Roth said cheap energy provided by natural gas "is the way out of our fiscal mess today." Shlaes said that a better immigration policy could help America achieve stronger economic growth.

But frustration with the current political situation overshadowed the substantive policy ideas.

"What Washington does in its offices matters a lot," Shlaes said at one point.

Norquist blasted the illusion of economic growth created by Keynesian economics, comparing it to moving a bucket of water from one end of a pond to another. He said liberals must know that these policies do not work.

"They’re not stupid. They’re lying," he said.

"They may also be stupid," Furchtgott-Roth retorted.

Norquist argued that when bargaining over fiscal policy, tax increases have a habit of crowding out other forms of fiscal reform like spending cuts. He said the Democratic Party wants to tax more not so it can pay down the debt, but so it can spend more.

He also said that eliminating deductions and tax credits too rashly now "kills tax reform in the future."

Shlaes encouraged conservative candidates to run on government austerity. While conservatives have been told that austerity is politically toxic, "government austerity is good," she said. "You can win on conservative values, including debt."

At an event where the legacy of President Ronald Reagan reigned, DeMuth tried to the enthusiasm of those who would simply apply Reagan’s policies to today’s fiscal crisis.

America’s political landscape is vastly different today than in 1980, DeMuth said. The tax situation is also different, as we have an improved tax code and lower rates today.

The nature of government has also been radically transformed, he said. The government has turned from focusing on governing and order into an "enormous transfer state," DeMuth said.

With this has come an enormous transfer of discretion from the legislative branch to the executive branch, a transfer that has imposed uncertainty on the economy, he said.

Simply asking about what Reagan did to solve the problems in the 1980s, DeMuth said, allows us to "avert our eyes" from some very different problems in our own time.