Thursday, March 24, 2011

Federal budgets and applied public choice theory

Atrios writes something so true you should affix it in your memory for the next two decades:

There's literally nothing that this Congress today can do to reduce the deficit 20 years from now. What you can do is sign into law legislation which reduces granny's pension 20 years from now. And, yes, given the way our system works it wouldn't necessarily be easy to reverse that decision 20 years from now depending on the politics and who is in power. But what will still be easy to do 20 years from now is cutting taxes on rich people and writing giant checks to defense contractors. Those things are always easy to do when Congress and their donors are mostly rich people. Reduce the deficit by cutting granny's pension, increase it again by cutting taxes on rich people. Rinse repeat.

. . .

. . . just to remind us of history I'm sure we all remember. That Democratic Socialist Bill Clinton got rid of the deficit. Alan Greenspan, who spent years fretting about the deficit, suddenly decided the great danger we faced was not having a deficit. And Bush tax cuts, and too and such.

Once this really sinks in, you realize that the only measure which leads to long-term balanced budgets is reform which changes the configuration of political power so that budget deficits no longer benefit the powerful. Going by today's projections, the main contributors to long-term budget deficits are rising medical costs, the Bush tax cuts, and war (and preparation for war). Therefore the principal budget-balancing methods that might work in the long term are:

  1. health care reform that reduces the power of people and industries that make medical care expensive.
  2. campaign finance reform and progressive taxation, which reduces the power of rich people to demand tax cuts (campaign finance reform directly, and progressive taxation indirectly by simply making rich people less rich).
  3. reducing funding for the military and defense contractors, which reduces the political power of the military-industrial complex by reducing the number of people dependent upon it.

You may think some of these changes would be bad. That's OK; it just means these reforms conflict with your political values, and I'm not even trying to argue you out of your political values. Just recognize, then, that budget deficits will forever be the price of maintaining policies consistent with your political values. Relax; it's not so bad; maybe it's even a price worth paying; but no amount of cleverness on your part will allow you to wriggle out of paying it.

Your faction may exercise heroic effort, tenacity, and ingenuity to bring the budget into balance. And if you succeed, the current political economy of the United States simply means that the politically powerful health care sector, the politically powerful overclass of wealthy people, or the politically powerful military-industrial complex will find some way to squander your effort and throw the government back into deficit, with the balance of money going into their pockets. This is not a piece of political polemic; it is simply an observation that I offer about the world, with recent history as my evidence.

And as for the widespread conceit of upper-middle-class liberals that there's some purely technocratic way to fix long-term deficit problems by twiddling around with the retirement age and the like — that's just an exercise in hopeless naivete.

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