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Democracy, Deficits, Duplicity

Your Humble Blogger is cranky about the New York Times. Specifically about the gimmicky gadget that says You Fix the Budget online.

First of all, I am no deficit hawk; perhaps I should write a whole note about how wrongheaded I find deficit hawkery. That isn’t this note, although Gentle Readers would do well to keep in mind that I am cranky in large part because of the blithe assumption of the NYT that the budget is broken unless costs match revenues exactly, year after year, for the projected future. Had the assumption been that the deficits should be kept to approximately the current percentage of the GDP, or that the projected budgets should have a buffer for unprojected deficit spending at need, or that debt service be kept to a certain percentage of projected revenues—any of that would likely have spurred me to discussion of the wrongheadedness of the details, and I might well have missed the bigger crankiness. But I was cranky about the whole thing, and with everyblogger posting her own solutions, my crankiness has focused on the bigger issue.

Which is this: the whole exercise works in the paradigm that the deficit is not a political problem. You are encouraged to fix the deficit. Fine, you can do it easily. I haven’t seen anybody posting a note throwing up their virtual hands and saying I can’t possibly fix the deficit, it’s too hard! No, it’s easy to make the numbers work. The problem is making the politics work. If you could cross out the budget bits you don’t like and could raise the taxes and cap the spending and otherwise make the little dots go blue, then you could balance the budget—but then we wouldn’t be living in a democracy. Heck, I could just draw a bunch of circles and arrows and declare the budget fine with a deficit of 6.8 gazillion dollars, but that wouldn’t be democracy either. The point—the whole point, for fuck’s sake—is that people disagree on their preferences and priorities, and that we have to bargain and negotiate and compromise, and then we have to win elections with the people who have made those compromises or we have to win elections over the people who have made those compromises, and then do it all again next year because everybody is a year older (or dead) and has new preferences and priorities.

This is most obvious in the easy way we can balance the budget in 2030 by pretty much knocking back Medicare. Health care is the source of two-thirds of the long-term deficit problem., and of pretty much all of the deficit problem that isn’t amenable to raising taxes as a solution. So. All we have to do is decide, now, to get rid of most of the Medicare costs. Simple!

Oh, and then we have to prevent people from voting, in the next twenty years, for legislators who support increasing Medicare. That would be about 80% of the legislators people actually do vote for, by the way, and that’s currently, with most of the baby boomers not yet eligible for its benefits. In twenty years, when the last of the baby boomers would have become eligible for the benefits—and will start to incur massively increasing health care costs regardless of Medicare benefit caps—I would think that getting a Medicare increase through would be, oh, no more difficult than it was the last time—under a Republican-controlled legislature and White House, remember. Particularly as we would be starting from a nearly-balanced budget, so who is going to vote for deficit hawks? Am I right? Or am I not wrong?

There are three possibilities, as I see them. One is that we really could act now to prevent people from having what will be their policy preferences later, through drastically reducing democratic participation. Two would be some sort of plague (or war or pestilence or climate change) that wipes out a goodly chunk of our middle-aged populace with minimal cost for chronic or emergency care. Mass graves: excellent for reducing the deficit. Three would be finding some way to control health care costs while still providing health care, thus making diminished expenditure on the part of the federal government politically palatable.

Oh, there are other possibilities. We could wind up taking most of the money we pay for chronic health care and care for the aging out of private funds. But if the point of deficit hawkery is that we are nationally borrowing from our children’s children, I don’t see the answer being individuals borrowing individually from our children’s children. This is, of course, one of the reasons why deficit hawkery makes no sense to me: nations don’t have children.

But that’s another story. This story, the story the NYT is peddling, is about how there is a fix to a budget that is broken, and the answer is to take it away from that messy old place where people fight for their interests and their policy preferences an priorities and just make the grey dots turn blue. As a Walt Whitman Democrat, that story makes me sick.

Tolerabimus quod tolerare debemus,


Well, so this is very well said, but here's the thing: The conclusion that I draw from this is that creating a budget via a political process is a fundamentally broken idea, if your goal is to reduce costs. If all you have to do is vote for it, everyone wants to vote for budgets that give them more stuff and make someone else pay for it. It seems to me like the best thing you can do is to reduce the amount of money that you spend via politics, i.e. reduce the overall size of government to the things you can't manage to pay for via the market.

If your goal is not to reduce costs, of course, you may not care. You can definitely get more "fair" results (for some definition of "fair") by letting everyone vote, than by allowing the free market to make everything as brutally efficient as possible. If what you really want is a candy bar, you're not going to get that by boiling up a pot of beans and rice.

But if what you want is to feed your family for the day, you're better off spending your $3.50 on beans and rice than on candy bars.

But if you ask people which they like better, beans and rice or candy, what do you think they're going to say? Especially if it feels a lot like someone else is paying for it?

Well, states and local governments create budgets successfully, even austerity budgets, all the time by political processes; it's an overgeneralization to say that "creating a budget via a political process is a fundamentally broken idea." Say rather that the Federal legislative process in the United States is broken, because it has been corrupted. The very wealthy own the legislators, so that even though the obvious thing to do to get the Federal budget back in balance is to significantly increase taxes on the uber-rich, who have regulated the market in their own interest so that all the wealth of the nation is funneled to them, the "political will" is somehow lacking to make this happen.

The other factor that makes fiscal discipline very difficult to achieve for the United States government is that, since the U.S. dollar is the world's reserve currency, the Federal Reserve can pretty much print out as many dollars as it wants without setting off hyperinflation. This enables the U.S. to run up a lot more debt than other nations could: government borrowing is not independent of the market in general, but the U.S. government is uniquely positioned to fit the market to its money supply demands. This "advantage" makes it easier for the Federal government to avoid the politically difficult choices that would be required by fiscal discipline.

Of course, one reason why capitalism and democracy are generally a good fit is that an economic ideology aimed at growth makes it possible, if the economy is managed well along capitalist lines, for capitalist democracies to avoid having to raise taxes to cut deficits, since income growth enables governments to increase revenues and balance budgets without raising taxes.

But the good news is: I solved the deficit! ME! Tell your children's children it was me.

Hm, I had a bunch to say, here, but none of it turned out to be relevant to irilyth's comment. And I do think that if your goal is to reduce costs, then yes, the political process is broken. Well, I wouldn't call it broken… neither popular democracy nor a democratic republic is at all likely to remove or reduce popular and successful programs for the general welfare.

In fact, I would go so far as to say that if a democratic system were set up in such a way that it is likely to reduce costs by removing or reducing popular and successful programs for the general welfare, then I would call that system broken as a political process.

Which doesn't necessarily invalidate the goal, or even preclude reaching the goal with a governmental system that also includes political processes but isn't limited to them. We expanded civil rights by going outside the political process, and (closer to this topic) closed a bunch of military bases by going around the political process, and the Bowles/Simpson panel was set up to potentially go around the political process.

Your Humble Blogger, of course, does not have cutting costs as a primary goal, or at any rate prioritizes democratic participation over cutting costs. So I am happy to see the successful and popular programs protected by their widespread support.


But the goal of reducing costs, like the goal of increasing availability of health care, or the goal of being able to simultaneously fight two land wars in Asia, is a political goal. And so is the goal of reducing the size of government.

So sure, involving people who don't agree with your goals (or who don't think they're of paramount importance) will probably mean that you won't get as close to your goal as you might if everyone agreed with you. But convincing them involves politics.

And unless your goals can be achieved in the total absence of other people, you're likely to need help to get even partway there. So there's politics again.

Or to put it another way, politics is the worst way of deciding how to allocate resources ...except for all the others.

i see we don't get to talking about the accounting identity issue here (offset private saving w/ public spending, or suffer) or how anybody feels about the probability of cutting the more important trade deficits when labor arbitrage & petroleomania are central to US econ.

the brutal efficiency of free markets... yeah i think i read about something called the efficient markets hypothesis in the bathroom of mortgage bank a few years ago. it DID sound good!

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