The Long Odds of Solving the Budget Crisis

The budgetary crisis in the US has reached a critical phase. The debt ceiling fight about to unfold will simply be the latest phase.

Experts say it is irresponsible to “play a game of chicken” with the debt ceiling. In the past, this means, Congress should increase the debt limit without resistance.

The Democrat Congress has played a game of chicken with a blowout budget and now we will be told the only reasonable thing to do is fund it. But the debt ceiling can be used as a lever to get spending concessions. To use it in this way is considered by Democrats as more dangerous than excessive spending. Is it really worse than a giant omnibus bill passed in the dead of night? A bill, hardly anyone even read? Are all previous spending decisions forever untouchable? Under pressure, can’t Congress go back and cut some spending? If Congress was balancing the budget we would not have to raise the debt ceiling in the first place. Let that last point sink in.

Is not raising the debt ceiling like facilitating a “spendaholic” and giving him the booze for another bender? Unlike the failed attempt to stop the spending done last session, the new Republican House majority will not be frozen out of the process.

It is too bad it comes down to this but every previous attempt to restrain spending has failed so why not use this tool for leverage to get some budgetary sanity? It is only because of a lack of alternatives that we find ourselves where we are in this process.

Yes, it runs the risk of destabilizing markets and politics but so does national bankruptcy. It is only a question of when we get destabilized.

As we recently pointed out,  we now have a series of positive, self-feeding feedback loops operating simultaneously and largely outside of normal political control. Any one of these trends such as the increase in interest costs or the demographic crisis hitting Social Security would be sufficient cause for alarm. But to have so many negative trends operating at the same time is really quite unique and dangerous.

The political machine in the US certainly has tried on occasion to restrain itself but deficit spending has been the norm since the mid-1960s with the adoption of the Great Society. Much of the expansion of government is simply an extension of that original idea. And the Great Society itself was an addition to FDR’s New Deal.

Some may fondly remember the Balanced Budget Act of 1997, which briefly gave us a short interlude of balanced budgets because Bill Clinton and Newt Gingrich had some maneuvering room after the end of the Cold War. Then there was Pay Go, a Congressional rule that any party suggesting an increase had to show from whence they would get the money. And remember the spending caps? Congress has broken free of all of these attempts to restrain them.

Nothing tried previously has worked, in part because America decided that it desired a very large and very expensive government. After a few budget surplus years in the late 1990s, we got back to the long-term deficit spending trend which has now reached the parabolic stage. That is why the debt ceiling fight is now so important. There may not really be an alternative to having this fight right now.

Conservatives and Libertarians see government playing a diminished role in the personal life of Americans, greater freedom, greater personal responsibility, and a smaller and less expensive government. Except for funds to defend the homeland and run the courts and the like, they see a small  Federal Government. The bulk of the social safety net should be on a state level because states must balance their budgets because they don’t have the power to print and borrow as does the Federal government. Further, if states become too oppressive, citizens can move.

As attractive as we think that vision is, it has not been embraced by the American people for a long time. Pitting self-responsibility against free stuff from the government has been hard to sell.

Some say it is because we have done a poor job of explaining our vision and the consequences of progressivism. It is true we have been shut out of institutions such as schools, the clergy, and the mainstream press.  It does not alter the outcome. We are losing.

We think it goes deeper than even that. Our voice is being heard, maybe not to the extent we think it should.  But the sad fact is the public is not buying what we have been selling. Americans have not wanted a small government and self-responsibility. They want a welfare state. They want to be taken care of and they don’t want to pay for it.

Progressives and Liberals want an almost total government with a government providing welfare, healthcare, education, child subsidies, a huge military for international intrigue, changing the climate of the earth, reformulating families and sexual relationships, a national security state, and a censorship state, a reparations state, a union with both labor and capital in a fascist like structure. Government should play a role in every aspect of life and individuals are to be cared for by the state.

This by its nature, requires a huge and expensive government. Democrats remain convinced it can be funded by taxing the rich, without negative consequences to productivity and incentives. They also maintain the fiction that all this can be achieved without compulsion.

Rolling debt out to the future plays into the Progressives’ hands. They get to promise the benefit and the cost is pushed mysteriously onto everyone through inflation and the debt onto future generations. No wonder the American people think a welfare state can be a free lunch.

The Progressive view has largely prevailed, and the conservative forces have put up ineffectual rear guard action.  We have not convinced people this financial shell game will end in ruin.

Democrats have their own internal divisions but they are much less consequential. Democrats largely move lockstep with one another and centrist elements have largely been purged from the party.

So-called nonpartisan organizations such as the Concord Coalition, The National Taxpayers Union, and the Committee for a Responsible Federal Budget crank out very interesting commentary and statistics but they too have also been ineffectual at stopping the spending and the piling up of debt.  

In the end, the American people are largely at fault for desiring the warm embrace of government payments without the real desire to pay for it. They wish to borrow production from the future for the benefit of today, largely forgetting what burden they leave on future generations.

Sadly, it seems no amount of argument seems able to innoculate us from the very real human foible of wanting things for free. Get what you can for yourself, as long as someone else is paying for it. It never dawns on many who that someone else would likely be.

We are sorry to reach such a dour conclusion but even if we are wrong, we are likely now too far along in the process to stop it before serious consequences hit.

The hope is the coming financial crisis itself will awaken some common sense in the populace and the crisis itself will be the catalyst to finally get reforms that put America back on a sound financial path. However, the pain of such a crisis is no guarantee the political ball will bounce our way. Often such crises simply make the government even bigger and more draconian because the crisis will require self-responsibility from a population that has forgotten what that is.

Educating the public is the best way to ensure the political ball bounces into the possession of those wanting freedom and limited government and that it does not bounce into the hands of those that want total government intervention.

In that regard, the Concord Coalition put together a list of lessons after observing years of budget battles that the American people need to understand.