The “I Dare You To Be Fiscally Responsible” Election
September 15th, 2010 . by economistmomThe Washington Post’s Ruth Marcus is “despondent” about the victory of the Tea Party candidate (Christine O’Donnell) over the more moderate Republican candidate (incumbent congressman Mike Castle) in the primary for Delaware’s open U.S. Senate seat. I agree that it’s bad news. As Ruth explains:
First, I had thought the silver lining of this election year might be to produce a Senate with a more robust cadre of moderate Republicans. That caucus has pretty much dwindled to the two senators from Maine, with very occasional company from colleagues such as Massachusetts Sen. Scott Brown and departing Ohio Sen. George Voinovich. It’s awfully hard for a caucus of two to break with the party…
But not as scary as reason number two: the ripple effect of victories such as O’Donnell’s on other Republican lawmakers. Republican members of Congress look at races such as those in Utah, Alaska and now Delaware and think: There but for the grace of the Tea Party go I. They will be that much more watchful of protecting their right flank against a primary challenge. They will be that much less likely to take a political risk in the direction of bipartisanship. In this sense, it matters less whether O’Donnell will win the general election — that doesn’t seem likely — than that she won the primary.
The Delaware result might be good news for both Tea Partyers and Democrats. It is not good news for the cause of good government.
That is the irony–that the Tea Party movement has become not so much a movement for “good government” as a movement for “small government.” Except that when you really listen to what most Tea Party candidates argue for, it’s not to shrink government by cutting the government’s largest programs (e.g., Medicare and Social Security). It’s not to propose cutting any spending that actually benefits any of their voters. In other words, it’s not to lay out any specific ways they would be able to reduce government spending to the levels that would qualify as “small government” spending. That’s because most Americans don’t really want small-government spending, when you get right down to it. Mostly these candidates seem to be promising what most Americans like to fantasize about: small-government taxes (low ones), with big-government spending. Of course, the basic math of that implies we’re going to be laden with many more years of big-deficits government.
With this early Tea Party victory, I expect candidates are just going to be more afraid of speaking any truth about the need to raise taxes or cut benefits.
So contrary to what these candidates may claim about their being for “fiscal responsibility,” I expect that whatever campaign slogans, promises, and attacks we hear shouted about during this campaign season leading up to the November general elections, they can be roughly translated as candidates saying to their opponents: “I dare you to be fiscally responsible.” The lesson from yesterday’s election is that that’s a winning strategy.
So much for “good” government.
Diane,
“I dare you to be fiscally responsible.” Concord/Peterson are worse!
You have the expertise and resources to tell the truth, but you don’t.
We need to deal with Social Security, Federal civilian and military retirement, state and local pension funds, the Pension Benefit Guaranty Corporation, Medicare, Medicaid, state and Federal retiree health benefits, private health insurance, the tax code, Federal, state and local spending, unemployment, underwater mortgages, Fannie, Freddie, et.al., bank failures, the FDIC, and the Federal debt.
So stop pussy footing around.
John Bailey
Just heard you on NPR. Thanks so much for being a voice of reason. Restoring the tax rates pre-Bush is what is needed now.
That money comes from 2% of us….why cant the other 98% get behind that? Thanks, even the seemingly even-handed NPR has been mostly a corporate mouthpiece for the wealthy with freakin Boehner given way too much airtime, and pundits cutting you off when you speak for that 98%
I was really happy to hear you on NPR and due to time constraints it seemed they had to cut you off. I’m interested to hear more of the type of things you talk about concerning the Tea Party. I think you hit the nail on the head. This party is all about cutting taxes and somehow “balancing the budget” but have no plans to do so and no realistic schemes to enforce such a balance.
I also like to hear talk of how the taxes are the lowest they’ve been pretty much EVER and we’re still the lowest taxed industrial country in the world, yet these people scream bloody murder about a proposed return to regular tax rates. Good on you economistmom and I look forward to viewing your blog more frequently!
Also to John Bailey, almost all of things could conceivably become “balanced” by slashing defense spending, dismantling the MIC, and actually enforcine tax laws on the wealthiest Americans.
Jason,
Your last paragraph is BS but that’s ok, you’re a partisan and free to post it.
Diane, you continue to make the distinction between small government and good government as if this is meaningful. Inherently, small government is going to be less wasteful because it has less purview to waste. And it seems that our choices are small and wasteful or large and wasteful. Shouldn’t we at least eliminate the waste before we argue we need more.
And before anyone jumps in, let me list a few sources of waste.
1. A compensation structure that leads to incredibly low turnover suggesting the structure is too high for retention (the only point of a compensation structure).
2. A benefits mindset that pays benefits to people regardless of need, so much so that there is no correlation between income and size of government benefits (of course there is a correlation with age but that’s an entirely different issue).
3. A service model that has no efficiency requirements such that spending grows massively ahead of inflation and population.
4. Multilevel bureaucracies all managing the same underlying function. In my state, we have four levels of government bureaucrats managing education (city, county, state, federal).
Maybe we could start by fixing these things and then see where we are.
I have no issue restoring the tax code to pre-Bush and pre-Obama. To do so would make the tax code less progressive than it has become. I do object to just doing it at the top end as it makes a ridiculously progressive code even more so.
I fail to see how slashing defense spending wouldn’t be the single biggest help to our buget seeing how we spend comparablythe same as all other industrialized nations combined. it’s not some kind of “magic bullet” but it’d go a long way towards balancing our budget-and its the last thing Tea Partiers/Conservatives want to cut.
I lilke your list of waste by Govt. they seem accurate to me, and more an argument against steamlining government than slashing programs outright.
My point is I’d like to see those things done before we start cutting programs or raising taxes. Somehow, they all defy the ability of the government to do. It’s always a cut programs or raise taxes discussion
Yeah I think I mistyped that. I agere, the last sentence should read “more an argument FOR steamlining government than slashing programs outright”
“a more robust cadre of moderate Republicans”
What about the other side?
Economistmom wrote: “most Americans don’t really want small-government spending, when you get right down to it. ”
Well, here’s the corollary: “Most Americans don’t really want big government taxes when you get right down to it.”
So where does that leave us?
Economistmom is betting that she can have the European-style, welfare state in the US, and that voters will eventually knuckle under and accept the taxation levels that Europeans pay. So she rants about fiscal responsible as a one-sided proposition: increase taxes to pay for benefits people have learned to rely upon.
Economistmom and her ilk are playing a game of fiscal chicken with the Republicans. Republicans aren’t going to step forward to recommend cuts in the Democrat Party’s signature programs: Medicare and Social Security. That’s the bullet the Democrats have to bite. Once the Democrats show statesmanship to lead on spending cuts, then Republicans can reciprocate with tax increases.
Economistmom isn’t trying to foster this kind of a compromise. She continues to dump gasoline on the partisan fires by wearing a mask of fiscal responsibility.
Gipper: the game of “chicken” is clearly being played on both sides–Democrats daring the Republicans to spell out their policies to reduce Medicare and Social Security spending, yes, but Republicans daring the Democrats as well to spell out the tax increases needed to adequately fund those programs. I fear the Dems have already rolled over in this game–long ago actually, when President Obama made his campaign promise to not raise taxes on anyone with income below $250,000. You are absolutely right that both sides have to compromise a little–Dems have to offer up some meaningful spending cuts before Republicans can be expected to offer up any meaningful tax increases. But when one side immediately rolls over (as I fear the Dems do time and time again by being apologists-turned-cheerleaders for the Bush tax cuts), there’s no reason for the other side to compromise at all. So I wouldn’t agree that I’m trying to stoke the political partisan fires; what I’m really doing is scolding the Dems for being “wimps” on the tax cuts (call me Michael Moore!) and throwing up my hands a lot.
Economistmom,
As the Gipper once said to the peanut farmer, “Well…..there you go again!”
You miss the point!!! It’s all about Democrats coming forward with offers of spending cuts before Republicans have any reason to move on taxes.
Why do you spend so much energy encouraging Democrats to let taxes increase? How does that course of action lead to any compromise with Republicans? That’s the easy path. You and other left-leaning deficit hawks should be showing some leadership (because you don’t have to face an electorate, this should be easier for you than the politicians) and recommend spending cuts?
Better yet, team up with responsible, right-leaning economists like Greg Mankiw and come up with a compromise solution between the 2 of you that balances the budget in 20 years. Let Greg propose the tax increases and you propose the spending cuts. 50% from cuts and 50% from tax increases.
If economists can’t get together to do this, then how can you expect the politicians to do it? Why can’t economists give the politicians a Roadmap!! Get the conversation started instead of carping from the sidelines.
The Roadmap Tour:
Concord Coalition and Petersen Foundation issue the following challenge to the Brookings Institution and American Enterprise Institute.
Balance the Budget in 20 years. Brookings is responsible for coming up with spending cuts. AEI is responsible for coming with with tax increases. Rule is that CBO scoring applies (so no assumptions about growing our way out of trouble).
Given the projected deficit in 2030, half of the gap must be closed through spending cuts, and half must be closed by tax increases. Brookings and AEI devise the policy paths that get us from 2010 to 2030.
Gipper, your method would yield a schizophrenic combination of impossibly large (i.e., almost certain to be rescinded) defense cuts and ridiculous tax changes (e.g., 20% flat tax down to zero income). In other words, each half of the package would be unacceptably extreme and therefore unstable. It’s an outside the box idea, though, and we need more of those.
Both this blog and the article “The Hidden Message of the Tea Party Candidates” are fine examples of hiding one’s head in the sand on issues critical to the future of this country.
I’m not a Tea Party member, yet. But I do want smaller government and less waste.
I find that Tea Party people I talk to DO want spending cuts. However, the ongoing, chronic false dilemma in Washington is the choice between “running a deficit” or “raising taxes”. Talk of cutting spending is never offered up, and that is blatently dishonest.
My generation will likely never see a dime from social security, yet I will most certainly pay into it all my life. We will probably have to be 100 or older to retire, at the rate the age continues to increase. That said, I am not planning on getting social security, I’m trying to plan for my own retirement so I’m not dependent on “Big Brother”.
We need to ween ourselves off the government teat. The simple economic truth is that government is most ineffcient when it tries to provide private goods such as health care or retirement benefits. The government should set up the rules and let the private market battle it out in a moral fashion.
The stimulus failed miserably, resulting in yet another example of failed Keynesian theory. If that’s not enough, just look at California where the spend spend spend and tax tax tax policies have gotten them.
At some point, GOVERNMENT ITSELF grows too accustomed to the revenues it receives. Then what happens in a downturn? States end up issuing tax refunds in the form of IOU’s.
If it’s good for the goose, it’s good for the gander. If you say that we have grown to rely on government benefits, I say government has grown to rely too heavily on soaking the middle class with taxes. And they’ve also grown to rely too heavily on our patience with their incompetance.
Gipper: the Republican part of that is easy - flat tax. The Republicans have always been upset that the poor don’t pay the same amount of taxes that the rich do, so it would be very easy for them to come up with a way to raise taxes, by putting the burden on lower-income families. Right-leaning economists frequently point out how many families actually pay no income tax. It would be very politically palatable for the right to say, “those people need to pay taxes!”
On the other hand, most spending cuts would affect the poor, as well, since that is primarily who benefits from them. So essentially, no matter what, the poor get shafted.
Perhaps one solution would be not to pay SS to wealthy individuals. I cannot think of one single reason that McCain and his wife should be drawing SS…and yet they are, every month. The, “I paid into it so I should get my money back” argument does not stand, because you are NOT getting your money back. Your money paid for the people who retired while you were working. Current SS payouts to high net worth retirees are being paid for by working people right now…about as regressive a tax as can possibly be imagined.
I love that you are able to say these things! Good for you for speaking your mind and sharing your unfounded fears. I didn’t see any quotes or other documentation within your article supporting your position, so I really enjoyed the read. It’s wonderful that such literary works of art are able to be so freely and cheaply published on the internet. Keep up the fear mongering! It’s awesome.
I’d go with a flat tax, but there needs to be a “War and Prohibition” Levy that is a flat percentage that fluctuates with how much money the government is spending on its luxurious wars, including drug investigations, incarcerations and convictions. Also, any over seas wars, and extra intelligence dollars. Sometimes, the American people have to be tax out their stupidity slumber, and neither party will do it. This Country deserves the two loser parties and this loser tea party fiasco too.
First, paragraphs are your friend.
Second, you’re wrong. The wars are less that 15 percent of the total deficit over the coming decade, even assuming we stay in both Iraq and Afghanistan.
That doesn’t mean we shouldn’t pull back but I wouldn’t consider them a “large part” of the problem.
I doubt that AEI would propose a flat tax. Don’t forget, they’d have to increase tax revenue in order to balance the budget. Here’s what I think they’d propose:
Tax employer healthcare benefits-hurts middle class
Eliminate home mortgage deduction -hurts the rich
Eliminate state income tax deduction - hurts the rich
Replace corporate income tax with uniform VAT rate
Raise estate tax threshhold to $5 MM and above
Keep current rate schedule’s progressivity
Raise or lower rate schedule to close budget gap by 2020.
It’s those deductions and exemptions that kill the revenue. They distort efficient allocation of resources. Taxing employer health benefits will be a huge brake on stopping healthcare cost increases. Eliminating home-interest deduction will put brakes on over-consumption of housing.
Oh, one more thing. AEI would also propose including Social Secuirty and Medicare benefit payments in calculation of taxable income similar to inclusion of unemployment benefits done today. The Democrats would hate that one the most, but it would raise a lot of cash.