Tag Archives: deficit

Snatching Defeat from the Jaws of Victory

Whenever I start talking about issues regarding the budget, I tend to get a few responses that go like this: the Democrats are pragmatic and the Republicans are crazy.

I tend to roll my eyes when I hear that because I tend to think it’s too simplistic and tends to look at any and all political issues in a black and white viewpoint.  I like to believe life is a lot more complicated than that. That, and most of the folks that are saying this seem to be hard partisans that will always find the other side as crazy while they are rational and sane.

While I don’t think the entire GOP is nuts, there is always a bit of truth in everything.  There are those in the GOP who I think are able to control the debate when it comes to the budget.  They have turned tax policy into a religion and not in a good way.

David Brooks takes the Republicans to task for basically squandering a perfect opportunity to get control of federal spending.  As Brooks notes in today’s column, the GOP has in many ways “won” the debate on spending and has forced the Democrats’ hand when it comes to the budget.

But instead of declaring victory and making a deal which would include closing tax expenditures and maybe even raising taxes, the party has not budged from its “no-taxes” stance, risking the federal government to default in a month’s time. Here’s what Brooks notes about the GOP.

If the Republican Party were a normal party, it would take advantage of this amazing moment. It is being offered the deal of the century: trillions of dollars in spending cuts in exchange for a few hundred million dollars of revenue increases.

A normal Republican Party would seize the opportunity to put a long-term limit on the growth of government. It would seize the opportunity to put the country on a sound fiscal footing. It would seize the opportunity to do these things without putting any real crimp in economic growth.

The party is not being asked to raise marginal tax rates in a way that might pervert incentives. On the contrary, Republicans are merely being asked to close loopholes and eliminate tax expenditures that are themselves distortionary.

This, as I say, is the mother of all no-brainers.

But we can have no confidence that the Republicans will seize this opportunity. That’s because the Republican Party may no longer be a normal party. Over the past few years, it has been infected by a faction that is more of a psychological protest than a practical, governing alternative.

Brooks pretty much tears the GOP a new one for not acting like a political party that makes deals and instead like a protest movement that doesn’t allow for any compromise.

And he’s correct in doing so.

Politics is and has always been a mix of compromise and principle.  It’s one thing to talk use ideology as a governing framework to guide oneself in a democratic society.  It’s is another thing to use ideology as something to hide behind, to keep yourself from governing and representing the people.

What the GOP is being asked to do is to accept closing some tax loopholes and subsidies.  Yes, that would mean “taxes would rise.” But really, are we talking about raising rates back to the Eisenhower era of 9o some percent?  No.

What this comes down to is what the GOP wants to be in the next few years.  It can choose to be a governing political party that accepts compromise and takes into account that there is another political party that they have to deal with, or it can choose to be a protest movement that doesn’t care as much about governing than it does getting accross it’s ideological message.  It can’t be both.

Republicans have an opportunity to make more inroads in 2012.  They actually might have a chance to win the White House.  But if the party chooses ideological conformity over responsible governing, they can expect to see those chances slip away.  As David Brooks says at the end of his column:

The struggles of the next few weeks are about what sort of party the G.O.P. is — a normal conservative party or an odd protest movement that has separated itself from normal governance, the normal rules of evidence and the ancient habits of our nation.

If the debt ceiling talks fail, independents voters will see that Democrats were willing to compromise but Republicans were not. If responsible Republicans don’t take control, independents will conclude that Republican fanaticism caused this default. They will conclude that Republicans are not fit to govern.

And they will be right.


A Nation of Cowards

There has been a lot of carping about President Obama’s budget from folks on the left and right.  As Steven Taylor notes, the President’s budget is only a proposal and nothing more, but that hasn’t stopped folks from calling him everything but a child of God.

Meagan McArdle once said that the talk of fiscal responsibility is really about politics- an excuse to beat the other side up for not being more prudent with the national bank account.  On Monday, we saw that in droves.  Republicans are quick to say that federal spending by the President and Democrats is driving the country to ruin, while Democrats harken back to the Bush years to talk about how the tax cuts under the former President’s watch have destroyed the American future.

But the fact is, both side are talking out of their backsides.  None of them want to touch the main drivers of the budget: entitlements and defense, so they go after the 12 percent of the budget and make it look like they are saving the country from fiscal disaster.  Ezra Klein isn’t joking when he says that the federal government is basically an “insurance conglomerate protected by a large standing army.”

Two of every five dollars goes to Social Security, Medicare or Medicaid, all of which provide some form of insurance. A bit more than a buck goes to the military. Then there’s a $1.50 or so for assorted other programs — education, infrastructure, environmental protection, farm subsidies, etc. Some of that, like unemployment checks and food stamps, is also best understood insurance spending. And then there’s another 40 cents of debt repayment. Calvin Coolidge once said that the business of America is business. Well, the business of the American government is insurance. Literally. If you look at how the federal government spends our money, it’s an insurance conglomerate protected by a large, standing army.

But you wouldn’t know it to listen to the debate over the budget. When House Republicans talk about cutting spending and the Obama administration talks about freezing spending, neither group is talking about the vast expanse of the government’s commitments. They’re looking at a small corner of the budget, the 12.3 percent known as non-defense discretionary spending. The stuff that’s not Medicare, not Medicaid, not Social Security or the military. It’s the odds-and-ends, so to speak.

And it’s a bad place to focus cuts. Politicians don’t take the axe to non-defense discretionary spending because they think Teach for America or the food safety infrastructure — both of which the Republicans are proposing to cut dramatically — is more wasteful than the Pentagon or the health-care system. They do it because Teach for America and the food safety system is less politically powerful than the Pentagon or Medicare beneficiaries. The budget ends up like the yard of a man who owns only a lawnmower: The grass is trim, but the trees are overgrown and the ivy is everywhere and the gazebo is falling apart. Yet we keep mowing, because that’s what we feel able to do.

-Ezra Klein

The thing is, if anyone proposes cutting entitlements and defense, they will get punished for it.  This is why Obama didn’t release a budget that followed the perscriptions in Simpson-Bowles.  In the long run, it would be great for him to release an outline that really tells it like it is, but in the short run- meaning 2012- everyone would hate him.  Republicans would go after him for cuts in defense (he’s making the nation less safe!) and in the entitlements.  Democrats would start talking about old people having to eat cat food because of  Social Security cuts.  The President may want to reduce the deficit, but he isn’t willing to stick his neck out for no good reason.

Which brings us to the real culprit when it comes to the deficit: us.  The problem isn’t as much the politicians, as it is the American public that wants a balanced budget in the theoretical sense, but not in reality, not when it might take away this program or that tax credit.  Steven Taylor notes:

If one considers that perhaps the most popular piece of legislation in the last two years was the bipartisan compromise in the lame duck session that extended the Bush tax cuts and extended unemployment benefits that may be all one needs to know about the politics of the deficit.  The vast majority of the American public wants a diet of giant cake that they can eat too and that, further, will have no detrimental effects on their long-term health (but, they want to complains about the fact they are getting fat and yet have no energy).

To talk pure politics for a moment:  if the Obama administration had come out with a serious budget proposal that did things like cut entitlements and defense and that, further, raised taxes (the kinds of things that have to be done to deal with the current fiscal trends), does anyone think that it would have been greeted positively?  Again:  this is not to defend the Obama administration, but rather to try to get us to think about where the real problems we face are.

As much as I would like top blame politicians, the bottom line remains this:  the reason that the Obama administration (and ultimately, I predict, the Congress) is unwilling to make serious attempts at dealing with the fiscal challenges facing the United States is because we, the people, would punish them all at the ballot box if they did.  We don’t want our entitlement cuts, we don’t want to cut defense spending, and we don’t want to raise taxes (some “we’s” want some of these things and some “we’s” want others, but there is no critical convergence of interest that will allow any of these to happen at the moment—and really, they all need to undertaken to one degree or another).

Voters needs to stop falling for assertions like cutting “waste” or foreign aid will solve these problems. See here, for example.   Until the public (and, really, most pundits/analysts/politicians) really takes all of this seriously, all this is just so much shouting in the wind.

The American public is like someone who wants to lose weight but still thinks they can eat all the ice cream they want and never eat the spinach.

Until we are willing to eat our spinach and take some sacrifice, nothing will happen.  There has been talk about the fact that we need grown-up politicians when it comes to the budget- we also need a grown-up electorate as well.

On the Schakowsky Plan

Blogger Tyler Craft gives his take on the alternative budget plan byJan SchaKowsky of Illinois, a Democratic congresswoman who sits on the President’s deficit commission.  Here’s a peek:

Congresswoman Jan Schakowsky (D-IL) has introduced her own deficit plan. This plan seems to epitomize the Democrats’ position on the deficit, which is, “The Republicans refuse to raise taxes to fix the budget. I’ll raise taxes… Entitlements? The only thing wrong with entitlements is we don’t spend enough.” Schakowsky’s only non-defense spending cuts are a modest reduction in farm subsidies and a method of “decreasing the cost of healthcare.”

Tyler also gives his take on deficit plans from sixteen politicos.  If you want to see a budding economist in action, read this post.