Emphasizing the “Win-Win” of Deficit Reduction
June 1st, 2011 . by economistmom
Like President Clinton at the Peter G. Peterson Foundation’s “fiscal summit” last week, I believe we need to do a better job emphasizing the positive of deficit reduction. Politically, compromise is a lot easier to achieve when both sides see something to gain (mutual benefit) rather than just stuff to lose (mutual “sacrifice”). I tried to make that point in a column that appears in this week’s Christian Science Monitor magazine (now available online here):
“Compromise” on the issue of deficit reduction has become a dirty word in Washington.
Politicians assume that fiscal responsibility is a zero-sum game – that if they agree to any policies that are consistent with the priorities of the other side, they give up their own priorities. If the other side wins, it must mean they have lost. But that’s all wrong.
The best ideas for the most effective ways to reduce the federal budget deficit happen to be win-win ideas, “bipartisan” in that the goals and priorities of both Democrats and Republicans are promoted rather than sacrificed. It’s time we emphasized what both sides (and the rest of us) have to gain from such compromise.
I give four examples of these “win-win” benefits of deficit reduction, that create good things that both political parties like: (1) strengthening our economy; (2) increasing intergenerational equity; (3) reforming the entitlement programs to reduce costs while strengthening the safety net; and (4) reducing tax expenditures to achieve a more efficient and fairer tax system.
Strengthening the safety net, meaning making it able to withstand the coming fiscal crunch, requires major reductions in already-promised benefits to the non-poor. When a leading Democrat steps up to admit this, we will be more than halfway to preventing a bond market crash.
The Australian government has already made these changes. Our politicians are not yet willing to bow to fiscal reality.
Each generation will produce what it consumes. How that generation decides to distribute the goods and services it produces is up to that generation. They could decide to raise wage standards so lower classes get a greater share. The could decide to raise taxes on the wealthy so the wealthy get a lesser share. They could decide to cut entitlement spending and let the ederly live in poverty so workers get a greater share. Bottom line is, it is up to them to decide the level of equity they want. The best thing this generation can do for them is not improve infrastructure and education to make them more productive. Will austerity (under a floating rate currency monetary regime) do that for them?