| Tuesday, April
19, 2011
The Fundamental Debate
The Wall Street Journal today ran the intellectual defense of Obama's
deficit reduction plan in today's editorial pages. It is "Paul
Ryan's Reverse Robin Hood Budget " (link)
by Princeton economist Alan Binder,. Ostensibly about the Ryan budget plan,
it says in abstract terms about what President Obama said in his speech: we
don't have a spending problem, we have a revenue problem. It does not start
by listing its assumptions: apparently it is assumed that you know what they
are, to wit, that Medicare and Medicaid and all the other entitlements we
have now are necessary and proper, the only permissible cuts in those
programs will be small and devoted to "eliminating fraud and abuse, and the
only real problems we have are funding those necessary entitlements while
not going broke. Nothing else matters. Fortunately we can do that: stop
giving money to the rich. Don't cut taxes.
Example:
Worst things first. The plan threatens to
eviscerate Medicare by privatizing it—with vouchers that, absent some sort
of cost-control miracle, would fall further and further behind the rising
cost of health insurance. And to make that miracle even less likely, House
Republicans want to repeal every cost-containment measure enacted in last
year's health-reform legislation.
Then it summarizes:
It gets worse. The House Budget
Committee's own rack-up of changes from the CBO baseline displays the
much-ballyhooed $5.8 trillion in spending cuts over 10 years. But it also
displays $4.2 trillion less in tax revenue. How many Americans know that 72%
of Mr. Ryan's claimed budget cuts would go to fund tax cuts that
overwhelmingly benefit the rich?
Medicare would not die a sudden
death under the Ryan plan—people over 55 are grandfathered. It would,
instead, succumb slowly to a debilitating illness as the growing gap between
the vouchers and the cost of private health insurance priced more and more
seniors out of the market. This fate evokes conservative activist Grover
Norquist's famous image: to keep on shrinking the government until it's
small enough to drown in the bathtub. And who would go down the drain with
it? Not prosperous Americans, whose huge tax cuts would more than compensate
for their higher health-insurance bills, but middle-class people who really
need Medicare.
There's another summary that lets us infer the assumptions
under this:
But follow the numbers out for decades, and the Ryan
plan does turn into a lion. The CBO's scorekeeping shows federal spending
under the House Republican budget falling to just 14¾% of GDP in 2050.
(It's now 23¾%.) That sounds great—until you think about it.
For openers, the last time federal spending was that
small a share of the economy was 1951—before Medicare and Medicaid, before
the Departments of Health and Human Services, Housing and Urban
Development, Education, Energy, Transportation, Veterans Affairs, and
Homeland Security. You get the idea. Somewhere, Mr. Norquist is filling
his bathtub.
That, I think, states the assumptions under which Blinder
and the White House operate: All that growth in the Federal government since
1951 was necessary and proper, and we are much the better off for it. Of
course it was the fear of that growth that caused Bill Buckley to found
National Review in 1955, and state that its mission was to stand in the way
of history shouting "Stop!" This has been the fundamental debate between
conservatives and progressives ever since. It is made complex by another
debate: there are those who believe that government has a positive role in
doing good through "progressive" means, but that these are not the job of
the federal government: they are the province of the states. And that was
greatly complicated by the problems of civil rights: did states rights mean
the right of the states to continue segregation? Were federal civil rights
laws required in order to make the law color blind? Did not the cause of
civil rights demand the enormous expansion of the power of the federal
government and the creation of new bureaucracies? Because once the new
bureaucracies were created, they would grow. Parkinson's Law and Pournelle's
Iron Law would see to that.
But are all those bureaucracies needed? Do they do good or
harm? Would education in the United States be better for a continued growth
in the Department of Education, or would it be bettered by abolishing that
Department entirely? Do we need Energy and Transportation as separate
Departments or could their necessary functions be performed by Interior and
Commerce? Are we really better off for their existence? It is surely worth
debating, but Professor Blinder does not see that. To him it is self
evident. It is not self evident to me. The necessity of
maintaining federal spending at 20% GDP and above seems to me the essence of
what we ought to be discussing. ==========
Regarding civil rights: when I was a young man in high school in the legally
segregated South, I thought the law ought to be colorblind. I was thought a
hopeless radical for thinking so. When the civil rights debates and freedom
rides took place, I did not support them: I remain an advocate of states
rights. The one federal law we needed was enforcement of the right to vote.
That was clearly constitutional, and Congress clearly had the plain black
letter law power to enforce it by appropriate legislation. In my judgment
that was the proper course of events, and all the other federal
interferences in state affairs like the various school takeovers were not
merely needless but did great harm. I see no reason for changing that view
now. But that is an aside and not a part of the current debate, which ought
to be: To how much of someone else's income and property is
someone entitled by reason of existence? If you cannot see well, are you
entitled to spectacles paid for by someone else? If you have no teeth, are
you entitled to free dental work? If you have no kidneys, are you entitled
to one from someone who has two and needs only one? If you are anemic, are
you entitled to someone else's blood? If you are hungry, are you entitled to
have someone buy you lunch? If you are poor and disabled, are you entitled
to have someone pay you enough so that you enjoy a dignified and satisfying
life? If you are poor and lazy (have ADHD) are you entitled to have someone
pay you, and how much? By entitled I mean a legal
entitlement: you are owed money, and armed agents of the government will be
sent to collect it for you. I do not mean some ethical or moral obligation
based on religion laid against those who will pay: I mean that the public
hangman threatens those who owe you if they resist paying.
Clearly these entitlements do not fall equally: some get them, and some do
not. Equally clearly the obligations to pay them do not fall equally. Some
have to pay, and many others do not. I am told that more than 40% of
Americans do not pay any income taxes at all, and of that 40% a substantial
number get "earned income credits" which is to say negative income tax: they
get "refunds" from withholding taxes that were in fact not withheld. The
question, then, is who takes and who pays?
This is the fundamental debate. The progressives say that
the remedy to the deficit is to take more from the rich and give more to the
poor. Share the wealth, and all will be well. The problem with this,
as Lady Thatcher observed, is that after a while you run out of other
people's money. Taking the investment wealth and distributing it results in
less investment. The remedy to that is to take even more and invest some of
it. See Clinton's campaign speeches for more detail. But that has been tried
many times, and Central Planning does not seem to work well as a means of
investment. The Five Year Plans never worked, and over time the USSR, empire
and all, spiraled into insolvency even as West Germany became a great
economic power. Obama and his intellectuals have made it
clear even as they try to obscure what the debate is about.
The Ryan plan has received vastly too much
praise from people who should know better. For a while, it was even
celebrated as "the only game in town," which it never was. It was preceded
by both the Bowles-Simpson and Domenici-Rivlin plans, which are vastly
superior in every respect. Within days of Mr. Ryan's announcement,
President Obama chimed in with his own ideas on deficit reduction—another
huge improvement over the Ryan plan. Now we await the Senate Gang of Six's
entry.
No, the House Republican plan is not the only
game in town. It's only the worst.
Which, on analysis, parses out to: the entitlements are
necessary and proper, and cannot be cut. Since we can't cut the entitlements
we must raise taxes.
The President has said we cannot continue to spend more than
we take in. No one questions that. How that will be accomplished is the real
debate for the 2012 election. That election is crucial: it will determine
whether, finally, those who have stood in the path of history shouting Stop!
since the 1950's will finally get the attention they deserve without the
horrible distractions of the Cold War. It will determine the future of this
republic. ============
Subject: Alan Blinder's little lie
Jerry, in today's View you quote Alan Blinder as
writing, in part, "For openers, the last time federal spending was that
small a share of the economy was 1951—before Medicare and Medicaid, before
the Departments of Health and Human Services, Housing and Urban
Development, Education, Energy, Transportation, Veterans Affairs, and
Homeland Security."
What Professor Blinder very carefully fails to
mention is that, although there wasn't a federal Department of Veteran's
Affairs, there was the Veteran's Administration, predecessor to the
Department and doing exactly the same things. Clearly, he wants us to
think that the current Department is something new that didn't exist in
any way, shape or form back in 1951 to help explain why the Federal
Government needs to spend such a high percentage of our GDP today. I think
it's safe to say that his argument would have worked just as well if he'd
left this false example out. This suggests to me that he's not as sure of
his conclusions as he wants us to think he is, and felt the need to
bolster it by slipping in this "little white lie." Of course, it could
also be that he simply doesn't know his history as well as he wants us to
think he does, but in either case, it casts his entire argument into
question, or at least, it should.
Joe Zeff
Indeed. I went to University on the Korean GI Bill, and of
course much of the great expansion of the US University system came from the
GI Bill of Rights of 1945 and after. I do not know the extent of Professor
Blinder's knowledge of the times, but he certainly has much of that wrong.
His point seems to be that the entitlements are indispensable, and we do not
have a spending problem, we have a revenue problem which must be solved by
taxing the rich. That is the official line of the current administration. No
cuts. More spending. And balance the budget, not by cutting back but by
taxing more. ============ Trumpets! If
you have not heard this, go listen. You'll be glad of it!
http://www.bbc.co.uk/news/
world-middle-east-13092827 ===============
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