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.)
Wisconsin and the problem with dichotomies.
The battle currently brewing in Wisconsin has done exactly what most people expected, pushed both sides into their respective corners, using definitive moral language claiming the immorality of either unions or union-busters. Unfortunately, this dichotomy is an inaccurate representation. Whether it be Mr. Beck’s or Ms. Maddow’s analysis, the assignment of morality or value to the totality of unions is nonsensical. Each individual union is an institution that should be judged on its own merit. I am far less sympathetic of the NFL Player’s Association as I am of coal miners. Furthermore, judging the whole of an industry’s unions broadly is equally problematic. While I applaud the public sector unions in Wisconsin for trying to find a compromise and meeting the fiscal demands of the cash-strapped state, I have also had loved ones choose to leave teacher’s unions because their demands compromised what should have been their primary commitment, the education of young people. Simply put, saying unions are bad or unions are good is myopic, as there ar
e good unions and bad ones.
This does not get Gov. Scott Walker off the hook however. His party has leveraged their power, as per the majority afforded them by the voters of Wisconsin, to cut spending in order to bring the budget into balance. They have played hardball and the unions responded, conceding the proposed financial demands. Gov. Walker however is not satisfied with financial stability but instead insists upon the revoking of basic civil rights. Anyone can point to instances where unions were responsible for something positive or something negative, but when you limit civil rights, you are crossing the boundary into immorality. Raise the financial committment of public workers. That is why Wisconsin is now completely controlled by Republicans, because the tax payers want to them to cut spending. However, it is already clear that the unions in Wisconsin are willing to cooperate. Anything further is contrary to the social gains of a century ago. To limit collective bargaining RIGHTS is just that, a limitation of rights and freedoms. In fact, it is hypocritical that the party whose rhetoric is centered on the maintenance of basic rights is simultaneously so eager to limit them, especially when those rights are predominately protecting the well-being of those who vote Democratic.
Tunisia and Egypt… not the same thing (or: why narrative does not always equal reality)
By Andrew Dyrli Hermeling
The human brain has a pretty terrible habitual need to find the simplest solution. Maybe we should call it Occam’s Razor by omission. We draw our conclusions using whatever information we have, but do not make much effort to gather all available data. However, human situations and structures are so enormously complex that gathering the requisite data is nigh impossible.
To make matters worse, humans feel the need to encapsulate these conclusions in narratives that mimic literary forms. The story starts with an exposition, finds a point of conflict, and then resolves that conflict in a satisfactory way. But does this reflect the truth? Literary critic Dr. Henry Louis Gates very brilliantly deconstructs the modern popular memory of slavery through his analysis and presentation of highly divergent slave experiences. In our effort to create a story, we often destroy the true nature of a situation. Which brings us to the current political upheaval in North Africa.
As Americans watch the process of state reconstruction in both Tunisia and Egypt, it is inevitable that Americans will seek the simplest method of contextualizing these events. Unfortunately, due to a preponderance of perceived cultural similarities, this erroneous contextualization is all too easy. By being located in the same geographic region, having stable governments that severely limit democratic freedom as well as similar religious and linguistic majorities and similar levels of economic power abroad, casual American observers immediately assume that the events in one nation can be an easily transferable model for the other. However, when one looks a little more closely it becomes clear that those more invested in the diplomatic nuances of dealing with both nations are treating them very differently. In his State of the Union speech Obama clearly stated America’s support of Tunisia:
And we saw that same desire to be free in Tunisia, where the will of the people proved more powerful than the writ of a dictator. And tonight, let us be clear: The United States of America stands with the people of Tunisia, and supports the democratic aspirations of all people.
Compare that to Sec. of State Clinton’s comments on Egypt. Instead of whole heartedly supporting the democratic aspirations of the Egyptian people, she urges Egyptian president Hosni Mubarak to enact “political, economic and social reforms to respond to the legitimate needs and interests of the Egyptian people.” Many American observers are left wondering why we cannot apply the Tunisian model to Egypt. The Egyptian people want a full democratic voice, so why is the American government being far more coy when addressing the situation in Egypt? For starters, Egypt’s cooperation with the United States in regards to the existence of the Israeli state makes the current Egyptian regime a valuable asset for American diplomacy. However, I would posit that the far more pressing concern for American foreign relations is the down side of the democratic process. Sometimes the result doesn’t benefit America. When Tunisia asserted its democratic rights, America could sit comfortably knowing that the result would likely be a secular government. We cannot be so confident with the result in Egypt as it might be far more comparable to the recent democratic results in Lebanon where Hezbollah recently scored an electoral victory. A potentially radical Islamist government in Egypt certainly keeps American diplomats awake at night.
And that leaves us with the central quandary of 21st century American foreign relations. What happens when our evangelical spirit for the spread of democracy yields results that are opposed to our equally zealous support of basic human rights or our desire for international stability, especially in the Middle East?
Update: Recently tweets and statements from the White House seem to indicate that they are starting to thaw in the their support of the Egyptian people.
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