The Balance Budget Amendment is stupid
I’m just listening to Sen John Hoeven (R-ND) about the Balance Budget Amendment. He’s talking about the need to get Washington to have fiscal discipline. 49 States, he says, have Balanced Budget Amendments. His own state of North Dakota does, and when he was governor, he had to tell people “we don’t have the money for that this year…” But, he says, if we take it to the people, we can find out what people want. And of course if so many states have it, it must be what the people want.
Now this all sounds nice except if you think about it.
States differentiate, in their budgets, between expenditures and capital investments, much like a business does. There are the normal operating costs that go along with where you’ve committed you’re money, and if you are a business, capital investments, where normally you borrow money to build your business. States quite sensibly make this distinction. That why they can have a balanced budget for their operating costs, and deficits for investments.
It’s important to remember that for business, deficits are important very often. Even in personal finance, it’s better to have some money saved or invested than to get rid of all your debt at one moment. Over the long run, those investments will be more helpful.
But the Federal government doesn’t distinguish between capital investments and operating costs. They’re all the same. So to say that the Federal government needs to have a balanced budget either means that we will have extraordinarily high taxes so that it can invest in the things that it does invest in – health, military, social security, education, etc – or it means that we will invest in hardly anything.
And both of those options means we would just be plain stupid.
We Do Not Have a Spending Problem.
I’m just watching Sen. Bob Corker (R – Ten) saying that “finally” the conversation has gotten to the right place. Instead of considering taxes at all, both “bodies are looking at packages that are focusing on the deficit” only by looking at spending cuts. Taxes are off the table.
A few points: as Bruce Bartlett has pointed out, in poll after poll, a majority of Americans don’t think we should only be talking about spending cuts.
Second, Republicans keep saying that we have a “spending problem.” But we don’t. We have a problem with the difference between revenue and outlays. In other words, because of multiple factors, we don’t have as much money coming in as we have commitments going out. The question is not ‘what do we cut’ but first, ‘how did we get here?’ E.g., look at this graph:
This graph looks only policy changes over the last two presidents, which is not the whole of the debt (since we have a deficit going into Bush’s years), it is a major portion. As you can see, the policy changes that Bush enacted had the greatest effect on the debt – $5.07 Trillion, versus Obama’s $1.44 Trillion. The rest of the debt is made up of what we have previously, plus the fact that we have one of the worse recessions since the 30′s, and revenue went down. Right now revenue is at 14.4% of GDP, the lowest since the early 50′s.
So to call this a “spending” problem is just factually wrong. It’s a revenue versus outlays problem (outlays that, by the way, this congress has approved this past April).
The last point is how unrealistic the Republican’s view is. The most unrealistic thing about this is that we will never, ever, ever, fix the deficit by spending cuts alone. It would so fundamentally change the way this country has been for the last 40 years that it just will never happen. Actually John McCain (R – AZ) actually made a good point this morning. He said the house Republicans were being dishonest with their constituents by hanging their hat on “Cut, Cap, and Balance” because it would never actually pass. They are also being dishonest with their constituents when they say that revenues are not a part of this solution (although, if the polls are right, their constituents already know this). The worst thing about this is that in 15 years, when all the baby boomers are using Medicare, and our spending ration qua GDP (which is right now around 20%) goes up to above 25% (which it will), we are going to have to have massive tax increases.
Solution Politics–Issue 2: Corporations
As I continue my series on solutions rather than partisanship, I want to tackle the issue of corporate America.
Vanity Fair recently published an article, indicating that 1% of Americans control 40% of wealth. While I am no Marxist, this drastic imbalance only promotes increased imbalance, contrary to the predicted results of the Reaganomic ”trickle down” model. Joe Scarborough and Mika Brzezinski touched on this on Monday, by presenting Daniel Costello’s op-ed from the New York Times. Simply put, the recession is over for the corporations, yet we still are suffering joblessness. According to Reaganomics, if corporations are doing well, they should be hiring. But they simply aren’t.
And that is because of a inherit flaw in the structure of a corporation. Again, I believe in markets, but I cannot see how completely free ones are sustainable. Corporate leaders do not answer to their workers. They answer to their shareholders, and more directly, those important shareholders who make up the board. There is ZERO motivation to hire when hiring is not necessary, because the accountability is centered around profits.
What is so surprising is that this is a problem that Theodore Roosevelt, the great progressive trust-buster, began to tackle over a hundred years ago. Why have we forgotten the great destruction wrought at the hands of 19th century monopolies?
Furthermore, the American model of society is based around a balance of accountability relationships. Our government is so resilient because of its built on accountability. Does no one remember learning checks and balances from Schoolhouse Rock? We should be applying the same balance to our economy.
That is the essential failure of both Karl Marx and Adam Smith. They assume that individuals, left to their own devices, will seek balance in the economy through some latent altruism. They don’t, they need pressure from some sort of external source to ensure that justice is put before profits. Unions, left unchecked, will naturally move towards Marxism. Corporate executives will swing towards laissez faire capitalism. Both polarities fail.
That should be the central concern of government, serving as the needed force of accountability, making sure that justice is ensured.
(It should be noted that I do not see economic equality as the mark of justice, just the freedom to achieve equality. There will always be those who choose poverty. If the system is just, then only those choosing poverty will be poor. I will unpack that more when I discuss welfare later.)
What if God’s Administration were in Power?
Originally I was going to title this post “Why I cannot be a Republican.” After reading Drew’s latest post, I realized that perhaps we shouldn’t politicize solutions, but rather have political solutions. And that got me to thinking. I was going to argue that I couldn’t be a Republican because of all the grandstanding about the budget, and the fact that their budget priorities are horrendous, in my humble view.
But I suppose I then realized that I could probably make similar argues – albeit about different subjects – concerning Democrats, or really about any group in American politics. I decided then to step back and ask a different type of question: what if God ran the U.S.? What would our nation look like?
Before you turn me off, just think for a minute. I’ve heard this asked before, and normally Christians who do so come up with things about sexual purity, the abolition of abortion, and other social programs conservative Christians have favored since the 80′s.
But since I’ve been deep into the theology of the book of Revelation, I think we should ask a prior question if we really want to judge this from what we think might be God’s perspective. The question is this: given that God has already inaugurated his kingdom on earth in the form of Jesus and his ministry, what would be the priorities of God’s administration on the topic that are now heatedly in the balance, like the budget, the military, etc?
I think once you start asking this question, you start realizing that the spectrum of right and left as we’ve understood it in this country really have little to do with God’s administration.
As an initial thought, let me just say that it is important to remember that the climax of the gospel presentations (and indeed of Revelation) is “king of the Jews” nailed upon a cross. So as I begin thinking about this for myself, let me just point out that kingdom and cross are the place to begin.
So, what do you think God’s administration would look like?
New Series: Solution Politics, not Political Solutions [the way I see it]
I’ve decided after an extended absence for the Salon, to unveil a new series (with a currently undetermined number of installments). Instead of dwelling on current events with a myopic scope, I want to focus on big ideas that are relevent but not necessarily topical. I’ve entitled the series, Solution Politics, not Political Solutions to emphasize a theme of using politics to solve real problems, instead of the current modus operandi of tailoring solutions so as to make them politically advantageous. So bear with me and my inevitable arrogance, as this is simply the way I see it. Disagreement is always welcome (and probably preferred).
Issue 1: Partisan coalitions are destroying government effectiveness
Alright, so this isn’t a ground breaking thought. Countless pundits decry the profound voice of special interests in government. The problem is, as politically active units, each individual voter is rapidly becoming a special interest. We all hold a trump card, the particular issue that determines who we vote for. For some of us it is abortion rights or abortion opposition. Perhaps it is size of government or the military spending. Regardless of the issue, for most Americans, there is one particular political issue that is held so dearly that it determines voting patterns and thus has a profound influence on party platforms.
In Europe and other parliamentary systems, voters align with parties based on their favorite issue and parties then forge coalitions after voting has taken place in order to create a functioning majority rule. In this nation however, the two parties must form these coalitions prior to an election so as to gather their 50.1% of the vote on election day.
People seem to hold this belief that the Republican party equals conservatism and always has, just as the Democratic party has always been a bastion of liberalism. However, these party alignments are the result of coalition building in an attempt to piece together demographics in order to get achieve the magic majority. I am not judging this particular force, and there have been many times when it has proven an advantage. (The Democratic resurgence in response to the Great Depression, for example.) However, right now it has become a stumbling block in the path of real solutions to American problems of governance.
There are a number of financially unsustainable systems in place in the United States. However, because of the relative balance between the parties among the totality of the American electorate, neither party is willing to alienate any particular portion of their base coalition. In the issue of welfare reform, there is little space for the Clinton versus Moynihan style discussion of the mid-90s lest Democrats lose their invaluable support in the impoverished inner-cities. Thus welfare is once again stuck in its relative ineffectiveness. (I will discuss welfare further in a future issue.) Similarly, the bloated defense budget is untouchable, not because doing so might diminish America’s ability to defend herself, (many military leaders, including chairman of the JCS, Admiral Mike Mullen, have testified that there are plenty of ways to trim the budget) but simply because doing so would put into motion a shift in the coalition balance. The Defense budget thus serves as a form of mutually assured destruction in the stand-off between both parties. Thus, another needed repair to the American system is left undone by the political necessity of maintaining coalitions.
In future issues, I will expand on certain potential solutions for various issues in American society. Maybe it was a mistake however to open with such doom-saying however, since as I see it, current partisan methodology will likely prevent any real solution from becoming legislation anyways.
leave a comment