Monday, November 28, 2011

Compromise as a Positive Value in Political Economy

Compromise as a Positive Value in Political Economy:
Rope-a-Dope on Debt, Deficits and the Size of Government
by Samuel L. Skogstad, Ph.D.

Over the past weekend bright glimmers of optimism were expressed in news reports that Republicans and Democrats seemed to be nearing a compromise on reducing budget deficits. But don’t yet break out the champagne and confetti. The hints of impending compromise may actually be only a rope-a-dope conspiracy to provide cover for politicians as they fail to address seriously the real problem. Here is why.

Our national debt, now $15 trillion (over $100,000 per family on average) simply cannot be sustained. We have accumulated this debt because a succession of administrations has routinely expanded government programs and spending, far beyond our willingness to be taxed. Recently Greece, Italy, Portugal and other countries have demonstrated publicly and dramatically, the calamitous outcomes associated with such irresponsibility. The reality that the same thing could happen here, it seems, has finally lodged itself in our own national consciousness.

Our politicians however have been unable to agree on a serious solution. Democrats, in general, want bigger government and claim to be willing to tax us (or some of us) to pay for it. This is made clear in the Obama administration’s February 2011, budget request, raising both expenditures and taxes. Republicans on the other hand generally believe the government is already too big and too intrusive, and that its cost is the root cause of the crisis. Thus the issue could---indeed should--- be framed as “bigger government” v. “smaller government.”

Republicans tend to wear their preference for smaller government like a badge, out in the open for all to see. Democrats on the other hand eschew overt calls for bigger government, instead insisting that more programs are needed to promote private employment and a dramatically different economic structure. Their campaign presentations emphasize such views as: “the rich don’t pay their fair share of taxes;” “Republicans oppose higher taxes because they don’t want veterans, or teachers, or policemen or fire fighters to have jobs;” “Republicans oppose subsidies for “green” energy and technology initiatives because they don’t care about polar bears;” or “Republicans don’t like Obamacare because they want you to die;” “Republicans don’t like mortgages for people with low credit scores, student loan forgiveness or extended unemployment benefits, because they want the “middle class” to live in hovels, remain uneducated and go hungry.”

But behind the rhetorical veil, the Democrats’ goal is clearly to spend more on programs favored by their constituent groups and to have others pay the bill. That could explain why the deficit reduction “super committee” has “deficit reduction” in its title. By labeling their task as “Deficit Reduction,” they avoid overt acknowledgment of their preference for more government at a time when that language holds little appeal to most voters. Concentrating on simple budget arithmetic---Deficit equals Expenditures minus Taxes--- they urge earnestly that it is only “fair” to “compromise” on a combination of tax increases and expenditure cuts. If Republicans accept that simple arithmetic characterization---i.e. “deficit reduction” alone represents a serious solution achieved through statesmanlike compromise-- then the “rope-a-dope” has been successful. But who is the dope? Any deficit, reduced or not, still raises debt and interest expense that taxpayers must pay.

The foregoing hasn’t touched on several other relevant matters. Specifically: (1) The “spending cuts” usually cited are not cuts at all, but mere reductions from levels requested by Obama, but never approved; (2) the “revenue increases,” for the most part, start very quickly, while the reduced spending growth begins much later; (3) forecasts of future expenditures and revenues are seldom accurate and together, generally err in favor of the administration’s request.

Up to this point, this observer has seen nothing to suggest that the issues of “big government” v. “small government” or “fiscal soundness v. political expediency,” will have been addressed seriously by the “super committee.” And on the domestic scene that, friends, is what the 2012 national elections are all about.

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