How a Budget “Compromise” is Built

I’m a Congressman (not really, but go along).  There is a dollar on the table.  I want to use it to fund a tax cut.  You are also a Congressman and you want to use it to extend unemployment benefits.  In a better world, the two of us along with the rest of the body must argue and listen and evaluate priorities to reach an agreement on how that dollar should be allocated.

That’s not how budget negotiations work in Washington.

There is another party missing from the table in my sample negotiation – the future taxpayer.  That guy doesn’t vote, because she hasn’t been born yet, or because he’s too busy drinking at the frat house to be paying any attention.  The negotiation process in Washington consists of you and I reaching a stalemate, then breaking the logjam by having the future taxpayer make the compromise.

You get what you want and I get what I want.  We can’t pay for it, so we put it on the tab of a high-school kid who isn’t represented by anyone.  He’s going to pay for it down the line in higher taxes and less effective government.  “Son, you’re welcome!”

We can blame this process on “politicians,” but that’s incredibly deceptive.  They only do it because we demand it.  We’re borrowing from our children like some psycho stage-mother ripping off a child-star.  How do we justify it?  We cover our actions with a politically corrupted interpretation of Keynesian economics.

Boiled down to idiotic simplicity, Keynesian economic theory in this context refers to using government borrowing to smooth out the impact of recessions and using surpluses to contain the bubble-risks from economic booms.  It sounds like a good idea.  Borrow money as a bridge in recessions and raise taxes to pay it off and build surpluses in good times.

It should work, but it doesn’t in part because of a political problem.  The trouble with Keynes’ ideas is that we only let our leaders turn those levers in one direction.  We only let them cut taxes and borrow money, never the opposite.  The “good times” when the government gravy train should be reversed can only be recognized in the rearview mirror.  Anyone who suggests taking government action to stem irrational exuberance will not only fail, but risk a riot.

The consequence over the past thirty years has been an economy running on nitro, steadily burning itself out on borrowed money injected over and over with no constraints.  We stimulate the economy in good times and bad while our debt skyrockets.  The solution?  According this Congress the solution is to extend government benefits and tax cuts, neither of which we can afford.

Will the Tea Party Movement fix this?  It might have some indirect impact.  The TP’ers aren’t serious at all about genuine fiscal responsibility.  No one who thinks we get to balanced budgets by repealing the Estate Tax really gives a damn about balanced budgets.

However, the rhetoric they are hiding behind is drawing attention to this problem.  People are finally starting to think about the broken throttle on the engine of federal spending.  We need to make the shift from thinking tax cuts can balance the budget to accepting that someone has to pay the bill for this party.

Will we ever, short of a catastrophe (yet another one?), mature enough to move past cheap rhetoric and accept a real fix?   That remains to be seen.  So far no one in the Tea Party movement is saying, “let’s be the ones to pay the bills.”  They still think they can cut just someone else’s budget priority (“keep your government hands off my Medicare!”) to get the job done.

Real budget responsibility will involve some pain and sacrifice that affects all of us and probably drags the economy for a brief time.  Put that on a bumper sticker and run for office.

It means people like me who make a good solid living will make a greater contribution so that we can develop better schools, protect some of the least fortunate, and shore up our infrastructure to keep us competitive.  It will also mean a thinner social safety net in which the unemployed cannot expect two years and more of jobless benefits.

Nobody gets to skate.

Authentic, grown-up solutions that can strengthen the country instead of tear it down will not be cheap.  They will involve some short-term pain all around so that we can protect the core viability of the republic and strengthen our economy in the long run.  A compromise that matters, one that can help us start solving our financial problems instead of deferring them will be one that galls nearly everyone on both sides of the aisle.

When we’re ready to elect people who tell us these things then we will have cause for optimism and pride.  In the meantime, get ready for a lot more empty talk about tax cuts and other political candy.

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