Monday, March 07, 2011

Balanced Budget Cowardice

Back in the 1980's, Ronald Reagan ran against the "tax and spend" Democrats, decrying Jimmy Carter's budget deficits. He then got elected, cut taxes, vastly increased government spending and the situation got so far out of control that he signed onto a tax increase. The budget deficit did not come back under control until Bill Clinton's Presidency, which due to a variety of factors (including the dot com bubble) produced a significant budget surplus. Republican partisans argued it was horrible to have a budget surplus, that paying down the nation's debt "too quickly" would result in disaster, and that the best thing to do would be to slash taxes for the wealthy and run the deficit back up. Oh, sure, they offered self-serving projections to indicate that the budget would remain in balance, but their manipulations were obvious - passing tax cuts that expired after ten years, for example.

While the Republican Party was cooking the books to defend this scheme the economy was souring, so you got their "tax cuts are good for any economy" argument - if the economy is strong, tax cuts keep it strong; if it's faltering, tax cuts will help it bounce back; if it's in recession, tax cuts will get us out of recession. The Bush Administration then launched two unfunded wars, Medicare Part D, and... let's admit it, G.W. Bush and his Republican majority spent like drunken sailors. G.W. tactfully described the nation's difficulties and tragedies as his having hit "the trifecta", and he and his party proceeded as if they had carte blanche for deficit spending.

No, I'm not arguing that the Democrats have played no role in the nation's deficit spending. I'm not even going to argue that Republican hypocrisy on the issue is somehow morally culpable. People can look to the facts and see, very easily, that both parties like to spend money. They can also see, without ambiguity, that the Republican Party has no sense of fiscal responsibility. But which party's presidents were in office during the worst run-ups of the nation's debt? It's not even a close question.

Every decade or so, the subject of a federal "balanced budget amendment" comes up. The appeal is simple - pretend that the nation's budget is equivalent to a household budget, pretend that the government's borrowing money in U.S. dollars, a currency it controls, is equivalent to a nation borrowing in a foreign currency or to household debt, pretend that deficits can never serve a useful purpose, and insist that a balanced budget amendment will magically cure all that ails the nation. It's a superficial, dishonest argument - even if you don't judge the federal politicians who demand a balanced budget amendment by their actions, it's very easy to find sound economic reasons why arbitrary caps on government spending, balanced budget requirements at the federal level, and you can look around the world to see what austerity programs are doing for the economies of nations like Ireland and the U.K.

Given the spending record of everybody in Congress, it's not really a surprise that the GOP is handing off their attempt to resurrect the issue to a freshman Senator. Make the tea partiers happy, pretend to be doing something, advance a bunch of policies favored by wealthy supporters, and once again pretend to care about deficit spending. Pretend it's bipartisan because, predictably, Democrats from conservative states and the usual array of opportunists will sign on. And best of all, submit the concept in the form of a non-binding resolution, just in case things go terribly wrong and it actually passes. (The goal here, after all, is not to actually be bound by these restrictions.)

But at the end of the day, the Republican Party knows that while beating the drum on budget deficits can get a segment of their base worked up, and can help them gain votes of people who (unbelievably at this point) continue to judge them by their words instead of their actions, the issue is a loser for them. Were they to win an amendment, they would have to slash and burn pretty much every spending program - and with limits on spending based on GDP we would have to further slash the budget every time the nation entered a recession. Let's not forget, folks, that a big part of the reason the present deficit is so bad is because the economy shrank. The best way to cover that gap is not to cut spending - it's to grow the economy - and repeated rounds of budget cuts during a prolonged recession can reasonably be expected to worsen and prolong that recession. The proposed amendment would also tie the government's hands in times of emergency. Want to go to war in Afghanistan and Iraq, or conclude that it's necessary to bail out the financial industry to prevent a depression? Too bad, so sad? It's extremely difficult to believe that a U.S. Senator doesn't know how idiotic it would be to impose a balanced budget amendment with no exceptions; it's also obvious that once you include exceptions you'll see them exploited in every budget cycle.

There are measures that could be much more easily passed than a balanced budget amendment, such as a system of automatic tax increases that would be triggered by a deficit in the prior year. There is no reason why the Republican majority in the House of Representatives couldn't pass such a measure right now. If they are going to pretend to care about the deficit, but pull the standard political line that they're too spineless to actually do anything about it, believe me - calls from people like the Koch brothers threatening to work to defeat their members in the next election if they trigger a tax increase is pretty much all the incentive they'll need to find their missing backbones.

But really, if the Republican Party truly is convinced that balanced budgets are a national priority, and that balancing the budget every truly is a necessity for the welfare of the nation, they don't need an Amendment. They don't need legislation. They simply need to decide, as a party, that they have a balanced budget policy and that they're going to stick to it. They can declare that, starting in fiscal year 2012 (or 2014), no Republican who signs onto a budget that involves deficit spending will stand for reelection (or that the deficit will be reduced by 25% per year over four years, followed by balanced budgets, with a similar consequence for violation). They can hold that if a Republican in federal office signs onto a budget in violation of that commitment, that person will face a primary contest and that the primary opponent will be supported by the Republican Party, with not a single endorsement or dollar flowing to the incumbent who broke their commitment to balanced budgets. They can then do just as they've promised, shutting down the government whenever necessary. It'll be an ugly process, but "everybody will thank them for it in the end," right? (Yeah, right....)

Nah, it's easier to pretend to care about deficits, and much easier to talk about balanced budget amendments, while continuing to spend like there's no tomorrow. Consequences? Individual consequences? Those are for suckers.

Update: Paul Krugman offers a capsule summary of deficit spending starting with Reagan.

Update 2: Ezra Klein describes a bizarre example of Senatorial budgetary cowardice:
The letter that Sens. Michael Bennet, Mike Johanns, and 62 of their colleagues sent President Barack Obama asking him to support comprehensive deficit reduction is an odd document....

There are a lot of letters and statements about deficit reduction flying around, but precious little legislation. If the 64 senators who signed this letter wanted to write and vote for a bill, that’d be a pretty “strong signal.” But for 64 senators to instead write letters about how someone else should be making affirmative noises about deficit reduction, well, read closely, that’s a signal of a very different kind.... Obama could be doing more to move public opinion, but on this issue, the empowered actor is the legislative branch, not the executive branch. And the legislative branch should begin acting like it.

2 comments:

  1. Moron alert! The GAO identified over 200 billion dollars in waste just on redundant programs. Yet through all the B.S. coming form the Clown in Chief and the legislature, we haven't heard anyone use some common sense and say start here! What, the Rhinos and Dems who depend on keeping around workers who produce nothing are so scared of loosing their greased palms that they're willing to spend the country into oblivion? Hypocritical bastards! Now, just today, one of these morons are saying we will need a QE3 to keep things going. Print more worthless money and up the debt more! When does it stop? Probably no time soon as you now have the hard core leftists openly questioning one's right to their own money with no outcry from either the Rhinos or the moron in the White House. Get ready to bend over kids because this administration is going to drive the dry tapered corn cob all the way up and get out the rubber mallet to do it? We're bankrupt and no one in D.C gives a rat's ass about it!

    ReplyDelete
  2. Thank you for warning us up front that you're a moron. ;-)

    We're talking here about redundancy and overlap. According to Fox News, "Sen. Tom Coburn (R., Okla.), who requested the report, estimated potential reductions would save between $100 billion and $200 billion a year." Thats a huge swing. Further, it's neither quick nor easy to streamline and consolidate government agencies - even if the Republicans treated the report as a road map for their budget proposals, and so far I see no sign that they're going to do so, the consolidation of programs would take years to accomplish and - yes - in many cases it will take an investment of money to effect the consolidation.

    I'm fiscally conservative - I really don't appreciate the way that the Republican Party both squandered the opportunity to use the Clinton-era surplus to rebuild the nation's infrastructure and to create a framework for a 21st century economy, and instead went on a wild spending spree. I would prefer a balanced budget, although that's far from a priority during recessions? But broke? No, our nation isn't broke. Not even close. Taxes are extremely low right now - they could be raised - and the U.S. is presently able to borrow money at very low interest rates. The world trusts our credit because, despite the nation's many problems, we're anything but broke.

    ReplyDelete