EconomistMom.com
…because I’m an economist and a mom–that’s why!

EconomistMom.com

How Can We Break Out of the Psychological Dysfunction on the Deficit?

March 7th, 2011 . by economistmom

Ezra Klein so aptly wonders whether John Boehner is more likely to lead on the solution or to continue to be a big part of the problem:

Remember Boehner attacking Democrats for holding ”a press conference to pat themselves on the back for ‘protecting’ Medicare, even though their government takeover of health care bill would cut seniors’ Medicare benefits by $500 billion”? Remember how he ended that statement? “Are you kidding me?”

Which gets to the real issue here: the public isn’t so much resistant to deficit reduction as receptive to demagogic attacks on the sort of policies needed to reduce deficits — including the ones we’ve already passed into law. Boehner has proposed some sort of truce on these issues to Obama — the president responded “positively,” Boehner said — but it’ll be the terms and strength of that detente, not whatever happens at constituent workweek, that’ll decide whether we get to a deal. And to a lot of Democrats, Boehner’s offer sounds a bit suspect: the GOP, having won the election in large part by hammering Democrats for Medicare cuts, wants an agreement to end criticism of Medicare cuts right before they propose some of their own. It’s got a very “do as I say, not as I do,” feel to it.

If Boehner is going to convince Democrats that this is good faith rather than crass calculation, he’ll need to go first. One way to start? Adopting a more balanced and honest take on the Affordable Care Act. No more calling the bill “job destroying” because it makes people richer and makes it easier for early retirees to buy health care on their own. No more attacking the bill for being both fiscally irresponsible and for cutting Medicare and taxing high-value health-care plans. The truth is, the Affordable Care Act does more to control costs in Medicare than any single piece of legislation we’ve ever passed. If Boehner is so serious about a new tone and an educational discussion over entitlements, then it’s time for him to admit that.

It seems to me that for all the talk about the need for “adult conversations” about the budget deficit, we continue to see immaturity on the issue from all the political sides of the debate:  temper tantrums about the small stuff, denial over one’s own role in the mess, bullying and finger-pointing about it being the other side’s fault, clinging to fairy tales and fantasies (such as about deficit-financed tax cuts or investments paying for themselves), ignoring advice we don’t like (even that we have ourselves asked for–i.e., the fiscal commission), and shirking our duties as the parents to our kids (by letting the debt continue to pile up).  There’s a huge amount of psychological dysfunction among our leadership right now.  How can we get anywhere with deficit reduction if there aren’t any adults in charge?  Where is the analogous miracle-worker (fiscal) therapist–if even Alice hasn’t yet proven to be the one?

(Addendum:  Perhaps CBO director Doug Elmendorf is the “therapist” Congress needs.)

10 Responses to “How Can We Break Out of the Psychological Dysfunction on the Deficit?”

  1. comment number 1 by: Arne

    Elmendorf says plans are diverse, but where is the war surtax, where is the financial transaction tax? Each of these ideas would create meaningful incentives to reduce costs we don’t really want.

  2. comment number 2 by: AMTbuff

    >the GOP, having won the election in large part by hammering Democrats for Medicare cuts, wants an agreement to end criticism of Medicare cuts right before they propose some of their own.

    Democrats want to call a truce on health care after their big party-line win and big election day loss. Yawn. That’s just gamesmanship, and both sides run the same plays.

    >No more attacking the bill for being both fiscally irresponsible and for cutting Medicare and taxing high-value health-care plans.

    I’ll buy the second two complaints, but the first assertion is completely valid. As it will be implemented, which is NOT as it was enacted, the bill will dramatically increase government spending. The Medicare cuts will not stand, and nobody expects them to. That money will be spent on the new HCR entitlement, as will all the easy tax increases that could have helped reduced the already huge deficit. It’s as if a nearly bankrupt family inherited some money and spent all the inheritance on a cruise and even borrowed some more from an uncle. This is not fiscally responsible in the real world.

    People who believe that expanding entitlements this way was a fiscally sound idea have lost touch with non-partisan reality. People who believe that one party bears a large majority of the responsibility for the coming fiscal train wreck have also lost touch with non-partisan reality.

    This is going to end badly, and neither party will step forward with an adult plan, packaged non-deceptively (that latter condition excludes the Ryan plan). Only the Tea Party shows any hint of backing up talk with responsible action, and that may be only because they are such a small minority. Not even the Tea Party had anyone who has proposed a plan that would get more than 20% of the way to fiscal balance. This is going to be very painful, and I am losing patience with people who pretend that there are answers not including extreme cuts in government promises (back to pre-1960 scope of benefits) and a whole lot of new taxes even as the economy crashes.

  3. comment number 3 by: Jim

    Until there is substantive discussion and then actions to actually permanently roll back levels of Federal pay, benefits, office staffing, and lots of Federal programs we will continue to grow.

    Being forced to do ‘zero based budgeting’ - being forced to fully justify each position, each salary/wage, et al would be a good place to start.

  4. comment number 4 by: Adam

    It’s maddening because deficits don’t matter.

    We have a fiat currency. Our grandchildren will no more pay down our debt than we did for WWII.

    We have crippling unemloyment, low interest rates and you people are concerned with deficits???

  5. comment number 5 by: Centerist Cynic

    Its like watching two spoiled children fight. Each child is refusing to see that neither of them is right. Republicans insist that any pain from budget cuts will be short term, the Government collects enough money in taxes and the free market is always best. Democrats scream that deficits don’t matter and offer up a mere $10.5 billion in cuts. Meanwhile the American people sit on the sidelines not knowing who to believe because they suspect that neither the Democrats or Republicans are being honest.

    Politicians need to tell the American people that tax receipts are at a 60 year low and if they don’t want to cut any spending, taxes are going up.

    At the same time all areas of the budget need to be looked at. Democrats and Republicans need to stop using military and defense spending as political footballs. There have been many good ideas put on the table to reduce spending over the past few years. Many of them like end of life care or hospital readmissions have been used irresponsibly to scare voters.

    The competing notions that our national debt is going to sink the US immediately on one side and that deficits and debt don’t matter on the other need to be debunked. Are we in immediate danger from our debt? Probably not unless Democrats and Republicans can’t come to some agreement to work responsibliy to resolve the issues.

    Sadly, we need people who care more about the country’s long term well being than winning the next election and there is not one in sight.

  6. comment number 6 by: Jesse

    It’s good that people start talking more about the deficit but most are still oblivious to the fact that there is no other solution than to cut spending. I just wrote an article about the GDP Bubble.

    http://www.wtffinance.com/2011/03/the-gdp-bubble-and-why-debt-to-gdp-is-misleading/

    Debt to GDP ratio is clearly clouding our minds and misleading us into believing that we can handle this type of deficit spending. Without all the Government interference that subsidizes fiscal irresponsibility and allows the American consumer to continue living beyond his or her means, the GDP would take a significant fall. Since economic intervention is requires to artificially prop up the GDP, our ability to handle that debt load is also artificial. One cannot artificially increase GDP and believe that we can handle such deficit and debt when the ratio used in support of such a belief depends on artificial spending. Without artificial spending the debt to GDP ratio would be alarming. The longer we fake our economy the worse the ultimate adjustment will have to be. We cannot solve one economic bubble by re-inflating it and creating the next one, unfortunately that’ s been the policy for a long time now.

  7. comment number 7 by: B Davis

    Adam wrote:

    It’s maddening because deficits don’t matter.

    We have a fiat currency. Our grandchildren will no more pay down our debt than we did for WWII.

    In fact, we did pay down our debt immediately following WWII. If you look at the first table at this link, you’ll see that the gross federal debt dropped from $271 billion in 1946 to $252 billion in 1948. It didn’t surpass its 1946 level until 1955. More importantly, the graph and second table show that, as a percentage of GDP, the gross federal debt plummeted from a high of 121.7% of GDP in 1946 to 32.5% of GDP in 1981. It makes more sense to measure the debt against GDP since this better measures our ability to service the debt. In any event, the debt is projected to hit 102.6% of GDP this year. This is just as the Boomers begin to retire. As you can see from the graph at this link, the debt is projected to explode over the next few decades.

    We have crippling unemloyment, low interest rates and you people are concerned with deficits???

    If you had been following this site, “us people” have been more than supportive of the short-term deficits necessary to deal with the financial crisis. What we are concerned with is long-term structural deficits that, by the government’s own projections above, will bury us in debt. This explosion in debt is simply unsustainable unless you are one of “those people” who do not believe in basic mathematics. We can deal with unemployment and still take rational steps to restrain spending by cutting the growth in health care, entitlements, and non-critical programs and increasing revenues by letting some or all of the ill-advised Bush tax cuts expire.

  8. comment number 8 by: AMTbuff

    I for one am very willing to feed the beast AFTER the beast has undergone gastric bypass surgery to reduce its appetite to a fully sustainable level. Until then, extra food merely generates extra excrement.

  9. comment number 9 by: Gipper

    Anyone who claims that supporting PPACA is good for reducing our structural deficits is not a serious supporter of long-term deficit reduction. Period.

    All the tax increases and cost controls on Medicare could have been implemented absent the expansion of insurance coverage mandated by PPACA. Again, anyone who supports expanion of insurance coverage to the uninsured is not a serious supporter of fiscal responsibility. Period.

    That includes Ezra, Economistmom, Alice Rivlin, et. al. Left-wing partisanship trumps fiscal responsibility every time. BTW, fiscal responsibility is not bringing the deficit down to 3% of GDP in 20 years.

  10. comment number 10 by: AMTbuff

    >All the tax increases and cost controls on Medicare could have been implemented absent the expansion of insurance coverage mandated by PPACA.

    See http://gregmankiw.blogspot.com/2011/01/give-me-1-billion-to-reduce-budget.html for a humorous analogy. By the way: I’ll offer to do it 10 times cheaper than Mankiw.