Walker Victory Underscores the Need for Wider Reforms

By Preston Cooper

Courtesy of CNN

A few moments ago, news networks projected that Scott Walker, the embattled Governor of Wisconsin, would survive the recall effort against him. We could talk a while about the implications of these results - how they put Wisconsin in play for electoral battles in the fall, how labor unions may grow frosty towards President Obama after he failed to campaign for their candidate, how recall may grow more common as a political tactic - but I'll leave that to the pundits. Instead, I'd like to open up a conversation on what this election means, in plain terms, for the future of the American economy.

Today, the Congressional Budget Office came out with a report reaffirming the severity of the debt crisis and the need for serious reform. Public debt, they said, will double over the next quarter-century if current budgeting policies are extended. Not only will the level of debt become unsustainable as borrowing costs soar, but the economy will feel shockwaves born of the government being in hock up to its eyeballs. Growth will taper off by double digits.

Many of the world's most powerful nations have collapsed for economic reasons. The most recent example is the Soviet Union, which succumbed to debt crisis and economic meltdown brought on by powerful special-interest groups, namely, the gas companies. There is even an economic term - sclerosis - for the strangulation of an economy by special interest. And as long as I still draw breath, I will not allow sclerosis to happen to America.

Across the country, state governments are doing battle with unions - a powerful kind of special interest group - in a desperate attempt to balance their budgets and bring stability to their economies. Scott Walker's survival of the recall election is a victory for fiscal sanity, and a blow against these special-interest groups.

But unions are not the only source of sclerosis in this country. Oil and gas companies, which receive billion-dollar federal subsidies for no apparent reasons, are also culprits here. Our tax code, riddled with loopholes and special rates for capital gains, is a breeding ground for sclerotic interests. Every earmark ever passed is a check against fiscal responsibility.

While balancing the federal budget and bringing down the debt will require more action such as reforming entitlement programs and streamlining defense spending, we cannot put ourselves on the path to solvency without taking on special interests. Few politicians have the courage to do it. But by cleansing our budget and tax code of items that do not benefit the country as a whole, we will achieve the goals of both parties - raising revenues and cutting spending.

A government's responsibility is to provide things that will benefit all of us, like national defense, education, and infrastructure. Governor Walker's victory should be a call to arms against the special interests who keep dipping into taxpayer pockets with one hand and strangling the economy with the other. I say it's time to take them on.

Europe's New "Iron Lady"

By Preston Cooper

Photo by Armin Linnartz.

America should borrow some ideas from Angela Merkel.

This week, members of the G8 - the group of all economies on track to get their rear ends kicked by China - will convene at Camp David to discuss the Eurocrisis, stimulus, and fiscal austerity. In debt-ridden Europe, German Chancellor Merkel has come out as an advocate for austerity, the idea of spending cuts and tax increases as a tool for driving down the debt. While no one likes to tell voters that they'll soon be getting less from the government for more money, it's better than the alternative.

Enter Francois Hollande, newly elected president of France. The socialist leader, also known as Mr. Monkey Wrench, tells Greece and other European countries in crisis to spend more on stimulus programs. The idea here is that a stronger economy will bring in more tax revenues, but I see several problems with this thinking. First, the stimulus will eventually run out, as it did in America, and the economy will be right back where it started. Along with a larger pile of debt. Second, countries such as Greece, where debt exceeds GDP by half, cannot afford to throw stimulus around to see if it will work. They need action now.

Fortunately, Chancellor Merkel remains an advocate for sensible, if unpopular, austerity. Under her leadership the Eurozone may avoid a massive debt crisis. I hope President Obama will borrow a few pages from her book and face reality about our growing debt problem. Fortunately, America has the luxury (ahem) of a debt pile roughly equal GDP, meaning the action we take to reverse its growth can be slower. This translates into less draconian spending cuts and very light tax increases. Waiting even a few more years will result in trillion-dollar cuts and tax hikes on the middle class.

Angela Merkel has earned herself a place next to Thatcher and Reagan in the ranks of great conservative leaders. Unlike President Obama, who pursues meaningless initiatives such as the Buffett Rule and claims they will solve our fiscal problems, Merkel is serious about the situation in front of her. And unlike Congressional Republicans, who use our debt crisis to pursue their own political agenda, she is in it to fix it. I wish her all the best.