Monday, August 01, 2011

Pointless wastes of time

I ought to be writing my dissertation right now. But instead I was checking my email, and a friend asked me to explain the current debt-ceiling crisis and what the Republicans are doing about it.

I share my answer here, so that you, my imaginary readers, can see how uninformed I am and how poorly I understand fiscal matters.

The short version, as I understand it, is that many Republicans believe that the most important long-term solution to our fiscal woes is to slow and/or stop deficit spending and the accumulation of national debt.

Like if I had $100,000 credit card debt on my current (meager) salary, my creditors would want to know that I will not default and leave them with all that debt. Borrowing more money in order to pay my creditors might get me through a short term crisis. But in the long term, I need to stop acquiring debt, which means bringing in more money and/or spending less.

In very broad terms, the various Republican plans want the US to spend less before it can borrow more. Democrats want to keep spending, and hope to bring in more revenue by raising taxes. Both parties say that their way (cutting spending, raising revenue) is fiscally responsible and the other way will not work.

None of the plans are very good, in my opinion. All of them stretch out over a period of ten years or so, with the tough sacrifices delayed so they kick in at the very end. That's ridiculous. If I want to lose 30 pounds this year, I can't plan to lose 25 between Christmas and New Years. The fact that we're discussing such obviously fraudulent non-solutions tells me that this is not a real crisis.

When I start seeing our political leaders behaving responsibly and coming up with sensible plans instead of just play-acting, then I'll be really worried.



Sylvia said...

Hi Juan Pena,

This much I understood already. What I want to know are the arguments behind each position. Journalists on both ends of the political spectrum are screaming at each other and I'm frustrated because neither side will actually respond to the other's allegations.

I have a lot of questions that admittedly come from reading more left-leaning media, though I did try to read some conservative papers also. I'm really not trying to say "Republicans, 'splain yo'selfs!"--I want real answers. (The responses I've found to these kinds of questions are generally along the lines of "you're an idiot" and "quit drinking the Kool-Aid" without actual data.)


*Multiple reputable journals (including the Economist) have said that revenue increases are absolutely necessary; what's the no-revenue-increase argument?

*Krugman says "The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further." He says history bears this out. Many others agree. What's the counter-argument?

*Why are feelings so strong against cutting defense spending? We have the largest military in the world by several orders of magnitude. Is such military spending really necessary? Whom are we defending ourselves against?

*What about allegations that Bush Junior squandered the Clinton surplus and caused the current deficit by lowering taxes and involving us in costly wars? (A comment at reads "You will recall that Republicans put us on this track to higher debt through unfunded, and completely failing, tax cuts, an unfunded war run off the books, unfunded Medicare expansion that forbids negotiation, and inattention to the real estate and financial fraud and excess that led to a Near Depression - and then obstruction of any effort possible to create jobs, or to give holders of fraudulent mortgages relief in bankruptcy court.")

*Are taxes really proportionally lower than they've been in 40 years? If so, why, and why would a tax increase be bad?

*What are at least some of the "corporate loopholes", and what would be wrong with closing them?

*What is the response to debt graphs like the one at (which shows Bush Jr. increasing the debt by 115% and Obama increasing the debt by 16%)?

*What is the counter-argument to increasing taxes on the wealthy?

the House of Payne said...

Well, these are good questions. A lot of good questions. So many that there's no way I can answer them individually. It would take hours. And I am not an economist, so my poorly informed opinions are unlikely to satisfy you.

Many of these are empirically verifiable questions, and have been studied extensively. I recommend you find a good free market-loving economist and start reading his blog. These aren't my issues, so I don't know who's the best choice, but Greg Mankiw seems pretty smart and sensible to me. It may take a while, but you'll eventually get pointed to most of what you're looking for. And you'll never get anywhere listening to the screaming people on TV or in the editorial pages. (Like Krugman, who used to be a good economist, and is now merely a vitriolic pundit.)

One thing I would suggest you think about is the difference between taxes and revenue. They're not the same; you can increase taxes without increasing revenue, and vice-versa. All economists agree that higher taxes have two effects: (1) to increase the government's share of the economic pie, and (2) to reduce the size of the pie, because you're punishing economic behavior. The debate is which effect, at any given moment, will be more powerful. Many Republicans do not want to increase taxes right now because they believe the second effect is more powerful than the first. In other words, they are not arguing against revenue increases. They are arguing against tax increases because they believe that would actually decrease revenue.

On defense spending, I wouldn't have a problem making cuts if I were the one doing it. But the Obama administration I expect to cut things I think are necessary, and leave in lots of things that I think are wasteful. Taking on the Pentagon is tough. Rumsfeld did a lousy job, and he was far better prepared than anyone Obama has for that task now.

Plus, I should say that we certainly don't have world's the largest military, in terms of men. (We're like 5th, depending on how you count.) We do spend the most, but not by a single order of magnitude, much less several. And budget size doesn't tell you whether you should cut a program. The United States spends more on health care than any country in the world, both in absolute terms and per capita. The same is true for education. Would you want to make a 50% cut in HHS or the Dept. of Education?

Alice Wills Gold said...

Don't care enough to read these loooong comments..therefore, it must not really be a crisis.

What I really want to hear about is your up and coming marital status change.

the House of Payne said...

Well, Alice, I'm getting married! Hooray! Anything else you want to hear about?

Kam said...

Just got a good catch-up on your blog. Always an interesting read. Thanks! I especially love all your interesting "links" in the middle of your articles.

the House of Payne said...

Thanks, Kam! Hey, send me an address for you guys and I'll get you a wedding invite.