I'm inclined to agree: every government program has a huge entrenched interest behind it. Seniors want Medicare and Social Security, public sector unions want to ratchet up bureaucracy, tycoons want corporate welfare and more anticompetitive regulatory capture, and the huge number of poor who pay no income tax have every incentive to push for more government spending. On the taxation side, there is significant resistance to increasing taxes and history suggests that we can't actually squeeze out a larger fraction of tax revenue compared to GDP. The only popular kind of tax - on the rich - will raise only a small amount of revenue.1. The Affordable Care Act won't be repealed or declared unconstitutional, nor will Republican candidates be running against it six years from now. Trying to repeal parts of it would likely backfire and destroy the private insurance industry, given that the process would be ruled by public choice considerations rather than rational technocracy. We still would end up with a larger public sector role in our health care institutions....
3. Social Security won't much change, keeping in mind that the number of elderly voters is growing larger every day. Given all their elderly white voters, the Republicans are already "the party of Medicare." The Democrats have become "the party of Medicaid." That locks three major programs into place, more or less. I don't hear serious talk of major cuts in defense spending.
4. Taxes won't be raised much (do the Dems seem to have great love for reversing the Bush tax cuts?), spending won't be cut enough (the recent Republican document is extremely weak), and within twenty years we will have a sovereign debt crisis in the United States, as one day a Treasury auction won't go well. I'll predict, but not favor, the emergency passage of a VAT, a' la TARP, which will restore fiscal stability but lower the long-term rate of growth. When that time comes, the VAT will indeed be necessary, though ex ante I would opt for less social protection and a higher rate of economic growth.
Put two and two together and I don't see any way for the US to avoid a sovereign debt crisis. My question is: what effect will it have on ordinary folks? Will it be a simple matter of the government saying hey, we don't actually have as much money to spend as y'all thought we did, or will it have a shock on the broader (private-sector) economy?
Note: the topic of this thread is the effect of a sovereign debt crisis. I think most of us agree that a sovereign debt crisis in the works; if you don't, lay out a way by which it can be averted, and that would be a valid topic for debate. But the blame game is not the purpose of this thread - and "put my tribe in charge - they're better people!" is not a way out of this mess.