Saturday, November 09, 2013

Who Cares About Deficits?

I've been meaning to welcome my old debate teammate (and very, very technically, former co-blogger) Emily Mirengoff to the blogosphere. She's been writing an ongoing series on education that is well-worth your time.

Her blog is titled "A Moderate Mindset", and last month she put up a post entitled "A Moderate Solution to the Government Shutdown." I, too, have sometimes written on the moderate label, a characterization I'm sure Emily would find laughable (in my defense, see my "The Moderator's Voice" post, where I discuss how I reconcile my currente leftist beliefs with what I take to be the virtues of "moderation" -- I think she might view it with a surprising level of agreement).

In any event, here were the counters of her proposal:
On the Obamacare issue, the Republicans are dead wrong. The law passed; they were unable to overturn it; and they shouldn't be holding the budget hostage in retaliation.

On the debt ceiling issue, the Democrats have spiraled completely out of control. Below is a video of a Democrat who agrees with me. He may look familiar to you; he’s a political rising star named Senator Barack Obama.


So here’s the compromise: President Obama agrees to institute a real debt ceiling–and actually adheres to it by cutting down government spending–and in return, the Republicans abandon their doomed anti-Obamacare campaign. It would truly be an astounding day for the U.S. government: Both parties acting reasonably! Compromise! The government re-opening!
Okay, from one erstwhile moderate to another, let's rap.

On the one hand, we have Republicans unreasonably holding the country hostage while they engage in futile efforts to try to block the healthcare law. They should knock this off, and that would be their side of the compromise. Now, a substantial part of the "problem" here isn't that Republicans oppose the Affordable Care Act. That's their prerogative! It's that they're engaging in extreme levels of hostage taking to substitute for the fact that they are not, currently, in a position to repeal the ACA. I take it that Emily is not proposing that Republicans not try to overturn the ACA if in the future they happened to regain control of Congress and the Executive Branch (such a promise would be unreasonable and entirely unenforceable in any event). So the Republican side of the compromise would be "stop trying to repeal Obamacare until you actually are able to repeal Obamacare." That's not nothing, given that the ongoing GOP temper tantrum on this issue is doing real damage to the country, but you can imagine why Democrats wouldn't exactly be leaping for joy over it.

On the other side, Democrats are supposed to accede to spending cuts in order to bring the deficit under control. The "Democrats have spiraled completely out of control" on the debt, and the way to fix it is spending cuts. We might begin by quibbling with the notion that Democrats have not concerned themselves with deficits -- tough to swing, given that deficits have been slashed dramatically during Obama's tenure in office. But since we're still running a deficit, debts continue to accumulate, and the debt ceiling remains a problem. To the extent we care about reducing our debt load, more steps need to be taken.

The real question is, why is this a "Democratic" sacrifice? The answer is that, somewhat strangely, Emily says we should reduce our deficit level solely by reference to spending cuts. But that is only one way to skin the cat -- another way of reducing deficits, of course, is by raising additional revenue.

Put another way, let's say we posit that Republicans care about deficits and Democrats don't. Republicans would demand steps for deficits to be reduced. Democrats wouldn't be particularly interested because (per stipulation) they don't care about deficits. And they'd be concretely adverse to cutting spending on social programs they value. But Democrats don't really have any objection to raising taxes on the wealthy, or removing the privileged and distorted position capital gains enjoy vis-a-vis other forms of income in our tax code. So presumably, if what Republicans cared about was "deficits", this would be an easy agreement to hammer out: high-income taxes are raised, deficits go down, everyone is happy.

This, of course, is not the terms of the debate. As Jon Chait has noted, the Republican position on deficits is that they would do anything to reduce the debt load, except contemplate any increase in taxes whatsoever. It is a very impressive thing that the GOP has managed to stake out this position -- rejecting even 10:1 spending cut/tax increase propositions -- while still convincing people that their primary concern is with deficits, rather than with cutting spending. And not just any government spending, either: As we learned from the Farm Bill debacle, the real object is slashing government spending that helps poorer Americans, demanding slashes to food stamps while fighting bitterly to maintain subsidies to wealthy agricultural producers (even the National Review found this to be beyond the pale). Certain spending -- for example, defense spending, or corporate subsidies -- doesn't seem to be problematic to the Republican Party at all. Hell, the Affordable Care Act reduces deficits -- yet for some reason this does not endear it to supposedly deficit-conscious Republican congressfolk. Deficit reduction is, at most, a tertiary issue -- perhaps a happy side-effect of depriving impoverished Americans of food, but nowhere near as important as insuring that income earned via capital are taxed at half the rate of earnings won through labor.

I should say that while I obviously oppose these Republican policy priorities substantively, I'm not really bothered by the fact that these are their priorities as opposed to deficit-cutting. Republicans have policy objections to government spending money on healthcare, food stamps, unemployment insurance, and other programs that primarily benefit poorer Americans. If, as a consequence, deficits are also reduced, that's a nice benefit, but it is a bonus, not the primary motivator, and where there are available deficit-reduction opportunities that don't cohere to these priorities (such as raising taxes, or, for that matter, passing the Affordable Care Act), they'll oppose them. Democrats, for their part, support these sorts of programs and wish to expand them. While they'd probably be willing to mitigate their impact on the deficit by passing higher taxes on wealthy Americans, that isn't their priority either and if that avenue is unavailable they'd rather keep the programs and expand the deficit. All of that is perfectly fine, it just demonstrates that deficits and debt are not actually what's driving the current controversy between the parties, and so bootstrapping the debt ceiling to the argument doesn't make a lot of sense.

The real lesson we've learned, hopefully, from the past few months is that the debt ceiling isn't something to grandstand about (and I hope Barack Obama, looking back on his senatorial self, has been appropriately chastened). So my moderate proposal flowing out of the shutdown crisis is considerably simpler: abolish the debt ceiling outright.

Note I am not saying that Congress should rack up infinite deficits. But the amount of debt we incur in a given year is a product of the budget negotiated within Congress and approved by the President, and the presence of a debt ceiling doesn't change that. All the debt ceiling does is threaten a global economic meltdown whenever Congress, as is often, can't get its act together. In essence, what the debt ceiling does is say "we, Congress, cannot be trusted to pass budgets which reduce our debt load. As a consequence of that dysfunction, we will periodically put the entire world at the risk of an unnecessary massive economic calamity unless we decide to take an affirmative step to stop it." This is not sound policy, whether as a tool for reducing the debt or for anything else.

If Congress wants to incur less debt, it should achieve that through the budgetary process. We should incur as much debt (or not) as results from the negotiated balance of revenues to spending that Congress approves in its budget. If that results in too-high debt levels, then the budget should be rerenegotiated to either lower spending or increase revenues. Periodically arming, defusing, and then rearming a ticking time bomb is neither helpful nor sensible. And that lesson, hopefully, has become quite clear.

No comments: