Map of life expectancy at birth from Global Education Project.

Thursday, December 06, 2018

The Party of Fiscal Responsibility

Unless you need a proctoscope to find your head, you know that for the past many decades -- in fact my entire life -- the Republican brand has been all about balanced budgets and "fiscal conservatism."

They have in fact campaigned on a platform including a constitutional amendment to require a balanced federal budget. Never mind that this is insane, as any economist will tell you. Paul Ryan built a reputation among the journalistic classes as a serious policy wonk by claiming he had a plan to eliminate the federal deficit, which if you actually read it was nothing of the sort. But still.

The reporters continued to regurgitate this fiction as conventional wisdom and uncontested fact -- the Republicans were fiscally responsible, the Democrats were profligate -- without noticing the True Fact that the federal deficit ballooned under Reagan and Bush the First, and then declined to zero under Clinton. That's right folks, the last time we had a balanced federal budget, William Jefferson Clinton was president of the United States. Then, under George Bush the Second, the deficit ballooned again. Then, under Barack Hussein Obama, the Kenyan usurper, it ultimately declined, despite the entirely necessary and appropriate, though inadequate, fiscal stimulus at the beginning of the Obama administration. (The debt increased under Obama, as it always will if the deficit is more than zero. People often confuse these.) Well, you know what's happened now. The Party of Fiscal Responsibility has complete control of every branch of the federal government. And the deficit has exploded with no end in sight. Specifically:

The U.S. federal budget deficit rose in fiscal 2018 to the highest level in six years as spending climbed . . . . The deficit jumped to $779 billion, $113 billion or 17 percent higher than the previous fiscal period, according to a statement from Treasury Secretary Steven Mnuchin and Office of Management and Budget Director Mick Mulvaney. It was larger than any year since 2012, when it topped $1 trillion.
Not to worry! We have a strong leader in charge who always wins! He will fix this problem, because he loves us so much.

Since the 2016 presidential campaign, Donald Trump’s aides and advisers have tried to convince him of the importance of tackling the national debt.
Sources close to the president say he has repeatedly shrugged it off, implying that he doesn’t have to worry about the money owed to America’s creditors—currently about $21 trillion—because he won’t be around to shoulder the blame when it becomes even more untenable.
The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the national debt in the not-too-distant future. In response, Trump noted that the data suggested the debt would reach a critical mass only after his possible second term in office.
“Yeah, but I won’t be here,” the president bluntly said, according to a source who was in the room when Trump made this comment during discussions on the debt.

But to Cokie and the gang, the Republican party is the Party of Fiscal Responsibility, eternally and ineluctably, now and always.


Don Quixote said...

CAN'T STAND NPR. Another fiction is that it's "liberal," when what it actually is is "idiotic." Smug ("Wait, Wait, I'm Not Funny"), and Scott Simon sounds more and more like Dr. Evil every weekend. There is no critical thinking at NPR. As you've noted, they transcribe what the out-and-out liar-in-chief says--all fiction and evil--and "report" it.

The Fourth Estate in the U.S. is moribund.

Cervantes said...

I actually think Wait Wait, Don't Tell me can be pretty funny. But the newscasts are fairly insufferable.

Bob Owen said...

I'm with you.

Republicans talk the talk, but find it difficult when in office to walk the walk on paying down the debt. I have a socialist brother-in-law that complains about the debt and thinks taxes need to go up. I told him I could agree with him *IF* he can guarantee that the increased tax revenue would actually go toward the debt and no new spending would occur to offset it. This pretty much shuts him down. He knows that politicians of every stripes will spend every penny collected and then some.

Conservatives know the balanced budget amendment is necessary because of this tendency and while only a couple have amended their constitution, almost every state has some kind of balanced budget requirement.

Cervantes said...

The above comment is publishable, but it is wrong. There is no reason as a general principle why some portion of increased taxes should not be used for spending. One has to justify spending vs. debt reduction on a case-by-case basis. And state balanced budget requirements are irrelevant. States do not issue currency. Federal budget deficits in times of economic contraction are desirable, also may be necessary to finance emergency measures. Surpluses are appropriate during an expansion, as we have now, but the Republicans are doing the opposite.

Note that economic growth and GDP are just as strong in western Europe, with higher taxes and higher social spending, as they are here. But by all measures, are health and social welfare are poorer. If conservatives "know" that the balanced budget amendment is necessary, it's because they don't know anything about economics.

Bob Owen said...

The debt will continue to increase regardless of which party is in office and at some point, the interest to service that debt will crowd out spending on social services transfer payments, military and other necessary programs.

So, If not a constraint on spending such as an amendment, what solution would you propose?

Cervantes said...

The deficit went to zero under President Clinton. The solution I propose is responsible (i.e. Democratic) leadership.

Bob Owen said...

Clinton submitted five different budgets until he finally caved in to Gingrich's proposal. He admitted that balancing he budget was not one of his top priorities.

However, I'll give him credit for signing off on it. Good job.

What I really want to know is what policies do the Democrats now propose to address this problem? Do they have a plan?

It's a fair question.

Cervantes said...

Yes, they want to reverse the cuts in marginal tax rates for the wealthy. I think in general the party is in agreement with the reduced corporate tax rates, but they want to eliminate loopholes and preferences, which is the other half of it that didn't happen in the Republican tax bill. Actually the bill is a mess and needs major fixes. Also, the main area of waste, fraud and abuse in the federal government, the military, with the $700 toilet seats.

Bob Owen said...

Wow! You've just hit my "hot button" on the waste issue.

I would also add to that the fraud in the social programs.

In general, the estimates of waste in all of the government sausage machine is between 30% and 50%. MSome of it is unneeded duplication of services.

Waste is a common area that I believe both parties can get behind.

Cervantes said...

I don't know where you get the 30-50%, that's utterly implausible. But I'll grant you waste exists. However, what most people get wrong is that virtually all of the fraud in social programs is committed not by beneficiaries, but by doctors and hospitals and nursing homes that rip off Medicare. As long as we're clear about that yeah, let's put a stop to it.

Bob Owen said...

We're clear about that. My wife is an RN that manages nursing homes. It's rampant.

However, it doesn't matter to me, as the taxpayer, who's ripping me off. I have no emotional need to protect any particular participants.

I'm still getting ripped off.

Mark P said...

You're right about most people not knowing the difference, or even that there is a difference between the debt and the deficit. In fact, most people have no idea what the national debt really is, not in dollar amount, but in who owes what to whom. According to what I have read, the debt was a about $20.5 trillion at the end of last year. Of that, about 28 percent was owed to other government agencies, like Social Security. Of the rest, foreign governments and investors owned about 42 percent. The rest was owned by the federal reserve, state governments, and private investors in the US. So, no, China does not own the United States.

As to a balanced budget amendment, the main goal of that is to justify cutting social welfare programs like Social Security and Medicare. Of course, as of now, SS takes in more money than it pays out, so it's not really the drain on the budget that Republicans like to claim it is. There are two kinds of supporters of a balanced budget amendment. The first is those who know why they want it (to eliminate social welfare programs), and the second is those who are told by the first group that they must want it.

There is a reason that the government has to pay a lot of money for seemingly cheap, ordinary products. If the government did not have very strict, detailed specifications for the products it buys, the suppliers would sell garbage to the government, and I mean that literally. If the military wants Oreos, they specify exactly how a creme-filled sandwich cookie must be made. Otherwise, some wiseass would sell the military cookies made from sawdust and floor sweepings. So don't blame the government for that, blame good, ol' American business.

And, as to government waste, I've always said you can't get rich by being a government employee, but you can get rich by being a government contractor. I worked in the defense industry for almost 30 years. I made a good living, but the people who made the best living were those who owned businesses that did government contracting. They became wealthy on our tax dollars. The funny thing is that they're the ones who hated paying their own taxes the most. If you want to cut government waste, one good way to start is to never let a private company do something that the government could do itself.

Anonymous said...

Private businesses have incentives to be efficient. Your competitors are always on your heels. Everyone is competing to deliver the quality customers demand at the lowest price.

Government has no such controls. There's no pressure from competition. No reason to strive for efficiency. And, as it currently stands, there's no limit as to what government can spend. There's also the specter of not being of not being able to fire or layoff employees when needed and the additional cost of labor with pensions after 20 years, full boat heath insurance costs and other bennies...

Mark P's suggestion that the government provide all the services themselves is an inherently poor idea. A better idea would be to encourage more competition for private contractors.

Cervantes said...

Well look folks, a couple of empirical points.

Private industry has the same need to set standards and assure quality from suppliers as does government. Pratt and Whitney has to pay just as much attention to quality for private jetliners as they do for military aircraft, but they don't pay $700 for toilet seats.

As for ol' anon there, of course there is a limit to what governments can spend. They have every reason to strive for efficiency because voters like good quality services but don't like to pay taxes. And the empirical evidence is that farming out government services to private contractors does not save money, in fact it typically costs more; and results in lower quality because private contractors rip off the government.

And it is not true that governments, in general, cannot fire or lay off employees. Where do you get that from? Government layoffs happen all the time. Yes, many government employees are unionized and they have protections, but do you object to workers getting health insurance and pensions? Do you really think that's bad? I suppose in principal you could save some money by contracting out services to private companies that exploit their workforce but that doesn't make it a good idea.

Mark P said...

Private companies have an incentive to be efficient. Really. Way back in the 1980's when I was working for a fairly large government contractor, I was involved with writing a proposal for a contract that was about to end and then be competed for. Here is how the company made it more efficient for the government. They made their employees work 10 percent mandatory, uncompensated overtime. Great deal for the government, right, I mean ignoring the fact that it violated wage-hour rules? But here is how the savings were passed on to the government. The company raised its hourly rates for the new contract but did not give their employees a raise. So employees were paid less on overage (adding in those 4 extra hours a week), but the government paid more and the company made more.

Let me give another example of how private businesses are more efficient. One of the owners of a company I worked for went in with the co-owner to buy some lakefront property, which was not particularly cheap. The first owner paid their half with their income tax refund. Think about that for a minute.

I don't suggest that the government go into the business of building fighter jets or anti-missile missiles, or nuclear submarines. However, there is an awful lot of work that goes on behind the scene that is usually given to contractors. That includes effective supervision of construction of those big projects, analysis of the construction contractors' work, analysis of test results, analysis of costs and a whole bunch of other stuff. All of that type of work could, and in my view, should be done by actual government employees.

Cervantes said...

Well, I think it's like most such questions, it's best to avoid sweeping generalizations. It often makes sense to hire contractors with appropriate expertise for specific jobs. Most biomedical research is contracted out to universities (including to me), NIH does some of it intramurally. Superfund cleanups, various consulting projects and technical infrastructure projects, etc. are contracted out. But everyday functions of government, from operating prisons to processing Social Security applications and paying benefits, are best done by government employees because that expertise and those systems are for the long haul. Some operations, such as law enforcement, have to be done directly by government for ethical, legal and constitutional reasons. It all depends.

But we just throw money at the military and don't seem to care if it's spent wisely. We don't do that with other government operations.