More Government Than We Deserve, But Just What We Ordered

The modern political discussion centers around the sheer size of government. The "Tea Party" movement a.k.a. the New-New Republican Party, seems to believe that there is too much government, and that we need to cut spending while cutting taxes (and that that will somehow cut the debt--this lacks all mathematical and economic evidence). The Democrats, while saying that we need a "hybrid" approach of both "revenue enhancements" (a.k.a. tax increases or eliminated tax preferences) and spending cuts, propose no major spending cuts and want to only tax the rich instead of following that central tenet of sound tax policy, 'broad base, low rates.' Needless to say (but said anyway), I take a middle route.

Anyway, there is a mentality behind the anti-"big government" crowd that we somehow are experiencing/suffering under too much government thumb--that we're getting something that we don't actually want. However, when polled, the American people prove that they have no idea how to do this, saying that they want to cut government spending but not actually cutting government spending on anything that affects their lives (if they even know that government spending effects their lives--many people deny getting government services a.k.a. "Keep Your Government Hands Off My Medicare" Syndrome).

I actually think that, despite Congress' approval rating nearing that of several historical despots, our system is actually functioning well, and that we're getting exactly the government we ordered: LOTS of government services and benefits (tax deductions & cuts included) WITHOUT actually paying for them.  This IS the government you ordered.


The deficits we're running now (remember--deficits are in-year gaps in revenues vs. spending) are the results of the ever-popular 'getting more than you deserve.' The American People have been riding a free train--and just like my 'old pal' Milton Friedman used to say, there's no such thing as a free lunch. These deficits are the desired path of the people--stuff without cost.

Regardless of whether it's the government's fault or not, the American people have been getting a sweet deal--and will have to pay for it through taxes, decreased spending, and lots & lots of pain. When it comes to cuts in spending, Americans can't agree on much, except for one thing--they don't want to cut their faves or anything that THEY get (see here, here, here, and here.)

So what's the conclusion? Make no mistake: Americans LOVE a big spending government. They hate paying for it. They're like the guys you hang out with that love to party with you, but never buy you a drink. We're a nation of free-riders. This is the mentality behind BOTH the Tea Party sentiment of "cut everything" and Liberals' shouting for "Tax the Rich." Both pass the buck, blame, and bastardry (not a word) onto another group of people--saying it's either too much spending (on others, of course) or too little sacrifice on the part of the wealthiest citizens that's causing the problems.

Earth to Everyone: it's all of the above. Fixing these problems are going to be PAINFUL. The coming tax 'increases' (in quotes because it's really just the expiration of the Bush Tax Cuts) have a nickname: "Taxmageddon." Yes, it's going to be painful--somewhere around $500 Billion out of the private economy (which is still less than half of our current deficit)--but it's a start. Cuts will have to come too.

But guess what: government spending doesn't cause economic damage--government debt does. When you spend more than you have at the current juncture (which pretty much every Congress has done), you are 'mortgaging the future.' When you do that, you take money from tomorrow and spend it today, losing out on the benefits of government spending tomorrow by having to pay interest on that borrowing--a loss to society. This isn't a (R) or (D) blame-game--this is just the way that people have framed things, and it's our collective fault.

It's as if he's saying "I'm a politician, and
I haven't the faintest idea what I'm talking about."

So, it's time to pay the piper. We've made our bed, now it's time to [lose] sleep in it. It's not fun, but it's time.

Why Taxes & Debt Matter To You--Explained, In Plain English

Okay, so studying taxes isn't exciting to all. But I thought I'd offer a brief overview of what the real issues are with government spending, especially through a lot of the myths/deceptive statements we're hearing nowadays.

The Usual Suspects--Sometimes
So, know this: our real government debt problems aren't caused by many of the things that people talking about: "welfare" (loosely defined), food stamps, waste-fraud-abuse, etc. And just labeling "government spending" or "big government" at fault is unhelpful. And the biggest single program, Social Security, because of how it is paid out (a hybrid actuarial system--people pay in today, receive from others when they retire), isn't really the main driver of debt, either (it has its problems, but those need to be fixed internally). So, what's really to blame comes down to two programs: defense and healthcare spending. These two will come up again.

Why these two? Well, a) they are funded out of general taxes and b) they are political favorites. Do we HONESTLY think that the best way to use the government as a tool of economic growth is to fund health care for the elderly, like through Medicare? Ask yourself that and really, really think about it. Okay, done? Yeah, I told you so.

And so why is this a problem? Other than the usual problems with debt, there's this whole thing about that we are not having to take out more debt to pay for our other debt--kind of like what caused the financial crisis (although the government's credit line is way bigger). So it compounds.

And Now, the Unusual (But Entirely Unsurprising) Part
So, a lot of people like to pretend that we've been here before (we haven't--even Reagan hasn't done it). There's a group of individuals on the Far Right (that's the most respectful name I got) that, while calling for cut taxes and cut spending, want to also cut some of the most central organizations to our government's function, like the Congressional Budget Office and the Federal Reserve. So what do they want to keep in tact? Military spending--already the biggest of all of the spending categories in our government, and expand it. Uhh...so you want to shrink the rest of government but make the biggest part bigger? You want to weaken the few controls that there are for stabilization? Yeah, not smart. You're not going to shrink the problem by growing the biggest piece of the pie, because government programs "shrink" slower than they grow.

Democrats/Liberals aren't much better. What's been the biggest Democratic accomplishment of the past 10 years? Sure, it might be getting President Obama elected, but I'd say that it is probably the passage of the Affordable Care Act, "Obamacare" if you will (and I will). Now that falls into the healthcare category mentioned previously, yes? Libs are unwilling to cut healthcare costs by reducing coverage, with the Affordable Care Act greatly expanding the number of people covered by government insurance, mainly Medicaid. And healthcare costs ain't gonna curb themselves.  I'm not trying to argue with increasing coverage, but it's not going to get to the debt problem. Facts.

So, healthcare and military spending are the biggest problems, and the two that neither side is going to compromise on. We've made our federal government into a "heavily-armed insurance company." So, then what is the real cause? Ideology, my friends. Inflexible, intractable, and sometimes just plain senseless, this is the polarization you hear so much about. When people talk about bipartisanship, there are really two kinds: one on which people from different parties agree on something and work to pass what they already agree on (i.e. nuclear non-proliferation), and the other on which they are willing to compromise to get something done--swallowing some pride. That's absent.

But there is hope--there are facts out there that happen to be promising for the future of reform. But it's not going to be easy at all. Some people will try to sneak things by the public or use catch-phrases to do stupid things, like how "tax simplification" actually means getting rid of people's favorite, tax preferences (like mortgage interest deductions). Nothing will happen to these, ever.

SO, WHY THE HELL DOES THIS MATTER TO ME, ALEX?
Geez, calm down. I'm getting there.

Okay, so you're probably going to earn some money in the future, yeah? And you probably will stay connected to this country in some way, even if you don't live here or plan to move (the U.S. may be in decline in terms of being the sole source of power on the planet, but it's still the biggest by a long-shot). So, we've established two relationships--paying in, and dealing with the results of what comes out.

These matter because as the debt gets worse, you will see the situation exponentially get worse. Debt grows not because of just interest on that debt, but because we're spending an increasing amount of our annual budgets--what the government spends each year--on just paying the interest. That means that we're not really using government to create anything, buy anything, or do anything, but just paying interest to private hands--often overseas. So this government of inaction gets even less choice. Right now, without this growing problem growing anymore, only 18% of the federal budget is non-mandatory, non-defense spending. That means all of foreign aid, highways, R & D awards, regulatory entities, National Parks, and agriculture (with a few other thousand things). Everything else that government does other than a) Social insurance (Social Security, Food Stamps, Medicare/Medicaid), b) Defense, and c) Interest on our debt, is basically in that 18%. 

This should make you think, is that, at all, smart?

We're heading towards what Fed Chairman Ben Bernanke called a "fiscal cliff"--the necessary moves to mitigate this problem will only become MORE difficult, MORE painful, and MORE unpalatable as time goes on.

In order to do what the Republicans want to do--balance the budget with only spending cuts--we would have to cut every penny of that 18% (which is wholly impossible)--PLUS another 12-15%. NEVER.GOING.TO.HAPPEN. That would leave the government with only the Department of Defense, the Social Security Administration, and the Department of Health and Human Services (Medicare/Medicaid), as well as a few accountants at the Department of Treasury (debt payments). No IRS (don't cheer--this would be horrible, actually), no White House, no Congressional staff, no highways, no National Parks, no Washington/Lincoln Memorial (for free, anyway), and no Secret Service. I may be exaggerating a bit (a bit, indeed), but oh, Republicans have called for a tax cut with a spending cut. You've got to be kidding me sometimes.

In order to do what Democrats want to do--oh wait, Democrats tend to avoid discussions about deficits and debt. Okay, while that's not entirely true, we can't just raise taxes a whole lot and not cut anything. And the cuts can't just come from Defense, either. Democrats need to relent something on Medicare/Medicaid or Social Security, as well as other programs.

Conclusion, Of Sorts
So, it's grim, but not impossible. In order to make fiscal sense, you need to have fiscal sanity--and right now, both parties are violating that principle of Einstein's definition of insanity: "doing the same thing over again and expecting different results." Republicans need to not be on such a tirade of government being the problem and not part of the solution, and Democrats need to be on less of a romp about government being the only solution to all of the market's problems. Moderation, indeed.

(Here's an interesting video from "economic master" Tony Robbins--with a mildly entertaining, albeit near-childish, thought experiment about how dire the situation is. There's a number of holes in it, but I thought it was interesting nonetheless.)

"When the Zealots Rule..."

When the zealots of our system begin to rule, we lose the American promise of compromise. We lose ourselves in "idle ideology"--lazy, impotent, and self-aggrandizing talk of men and women not of virtue, but of greed. 

Yesterday, one of America's last great moderates, Richard Lugar, Republican Senator from Indiana, fell to one of these zealots. Cheers erupted among those on the far right while the "old guard" of the Senate lowered their heads in disbelief. Lugar's 36 years in the U.S. Senate have been distinguished, with some of his most famous (though, in the eyes of the far right, infamous) work coming in the form of bipartisan support for nonnuclear proliferation. On that same topic that came to define Lugar, bipartisanship, the challenger, Richard Mourdock, said "I certainly think bipartisanship ought to consist of Democrats coming to the Republican point of view."

When the zealots rule, compromise, that central tenet that made peace in our history, and negotiation, which, though time-consuming and needing great amount of strategy, are both dirty words. The hard work that it used to take to forge peace becomes indolence and an inability to make our neighbor a compatriot, but instead, they fall as our enemy.

 This is only the latest in a string of upsets for those in the middle, and will certainly not be the last. This is also not to say that this does not happen on the left as well (though, the Occupy Wall Street movement has had substantially less "success" pushing out Democrats than the Tea Party has had in pushing out Republicans). It is a sad notion, but unsurprising. The filtered and repackaged world we live in has distanced itself from the world where we knew our neighbors, where great newsmen warned against being anti-compromise.

  When the zealots rule, the prospect of being right is outweighed by self-righteousness. Some would rather see the system crash, burn, and implode than deal with the problems of it. We refuse to admit that there isn't a perfect society where everyone agrees with us and that we never have to lose, never have to grow up. It is childishness, then, that overruns our politics. Children refuse to compromise--and we have chosen to remain as such.

And we all lose, when the zealots rule.