Why the GOP is the Bigger Default Risk
By Garett Jones
Rattner’s piece hits some of the same themes as the New England Journal of Medicine essay on “global spending targets” coauthored by Obama Administration officials that I discussed earlier. And it’s a reminder: For whatever reason, Democrats are serious about cutting health care spending the way the GOP is serious about cutting taxes. Democrats walked the plank for it once and I predict they’ll do it again and again.
If I’m a bondholder, I like people who cut costs and raise revenue. Note that I’m using the word “revenue” not “taxes.” To a Treasury bondholder, you and I are mere sources of net cash flow, not moral agents with inherent human rights. Contra Jessie J‘s catchy tune, it’s all about the money.
Some think the GOP is better on spending. Possibly, but to them I invoke Bruce Bartlett’s aphorism: The GOP is the Party of Medicare. Since Medicare is the biggest long-term spending problem, Medicare is the spending issue that matters most to Treasury bondholders.
The Ryan plan is evidence that the GOP has a wing devoted to cutting the growth of spending over the long haul. And his proposal for Medicare premium support or vouchers or whatever you call it would be better for the majority of citizens than a single government-managed plan.
But again: Bondholders don’t care about your well-being. Bondholders care about getting paid.
And as Ezra Klein notes, the Dems already cut $700 billion out of Medicare. The proof of the pudding is in the brutal, voter-enraging legislation they’ve already passed. So on health care spending, we should perhaps declare D’s and R’s about tied from a bondholder’s point of view.
If the two parties are roughly tied on their willingness to control the most important spending component, and one party is much more willing to bring me revenue, which party should I as a bondholder favor?
Coda: Best argument against my claim: House Speaker John Boehner. After the budget negotiations failed, he came to the floor of the House and told his caucus “I put revenues on the table” (just listen to the first 20 seconds). When Treasury bondholders heard those words–spoken in public–I’m guessing they breathed a sigh of relief.
This, bondholders surely thought, is a man we can work with.