Monday, November 21, 2011

Political Failure

by Conroy

I’ve never used this blog as a place to write about political issues or rail against political developments. As far as possible, I like to maintain an apolitical tone, out of respect to readers and because my deep-seated pragmatism guides me to a more centrist perspective. But the events of today require a response.

The much hyped Congressional “Super Committee” (officially named the United States Congress Joint Select Committee on Deficit Reduction) of six Democrats and Republicans has failed in its one and only task of identifying at least $1.2 trillion in federal budget cuts (spread out over ten years).

As you may recall, back in the summer there was a debt-ceiling crisis – entirely of the political class’ doing – when the United States nearly reached its debt (borrowing) limit. The crisis was precipitated when Congressional Republicans refused to extend the government’s borrowing limits without a guarantee of commensurate reductions in spending (anathema to Democrats). For their side, Democrats refused to consider spending cuts without some form of tax increases (anathema to Republicans). Neither side budged and the prospect of a limited government default was at hand. At the eleventh hour a compromise deal, endorsed by President Obama and House Speaker John Boehner, was passed by Congress. It raised the federal borrowing limit but required substantial cuts in government spending. Those cuts were to be identified by the Super Committee. There were to be no new taxes.

Following all this haggling Standard & Poor's actually downgraded the United States credit rating for the first time in the nation’s history, and the stock market plummeted by several hundred points (several percent of its total). It was a stark indictment of the men and women controlling America’s federal finances.

The national debt has been an issue for a long time, but it has really soared over the last decade as increased defense spending and rapidly increasing Social Security and health care costs, combined with two large tax cuts and a major recession to throw the federal budget out of whack. Despite non-stop talk in Washington about corralling the ballooning debt, nothing was done. That was supposed to end with the latest budget bill.  

Politics without Leadership
Now, nearly four months later, despite all of the promises and hoopla surrounding the Super Committee, and after ten weeks of in camera meetings, no schedule of spending cuts has been identified. Congress (and the President) has failed to lead; to make tough choices. Instead, as this summer’s budget bill stipulates, automatic cuts will be enforced starting in 2013. These include 8-9% reductions in both defense and non-defense programs. However, third rail programs like Social Security will not be touched.

No doubt in the immediate term – like tomorrow – we will see another drastic decline in the stock market as investors react to yet more government ineptitude.

This abdication of responsibility allows Republicans to go back the their constituencies and boast about avoiding tax increases and Democrats to go back to their constituencies and brag about maintaining vital social programs. And here’s the kicker: Between now and 2013, Congress has the power to exempt programs from the automatic cuts. It’s very possible that by the time 2013 comes around special interests will have lobbied Congress out of all serious cuts. In other words, nothing will be cut. Business as usual; and the national debt will continue to pile up at record levels. The President held a short press conference this afternoon where he promised to veto any bill that exempts programs from the automatic cuts. Sound words, but we’ll see.

This is so typical of the “kick the can down the road” behavior of American politicians. If it continues, that road will lead to disaster. Greece and Italy overspent for decades and now those nation’s finances are nearing catastrophe. Their problems threaten to undermine the Euro and maybe undo the European Union. There is nothing that makes America immune to the same disaster that’s facing Europe. One day all debts come due.

Real Solutions
When debt is piling up there seem to be three solutions: (1) cut spending, (2) raises taxes, and (3) both (1) and (2). This is so obvious that only politicians could miss it. The American debt is so large ($15 trillion) and the annual deficits so out of control (more than $1 trillion this year), that only major cuts in spending and revisions to the tax code will bring the national finances back in order. I’m not an economist, and I haven’t sifted through the dust-dry federal budget, but seemingly common sense solutions include:
  • Cut spending across the board, including for defense, Social Security, and Medicare;
  • Revise the tax code to eliminate loopholes and exemptions; and,
  • Revise the eligibility age and payment schedules for Social Security.
Social Security - the third rail of American politics

If additional measures still need to be taken, consider modest increases to taxes. Politicians like to think of themselves as leaders, but real leadership involves making tough choices for the greater good. Avoiding spending cuts will be popular; a lot of people would feel the pain of reduced benefits, services, and funding. Avoiding tax revisions will be celebrated; revisions and/or tax hikes would take money out of corporate coffers and citizens’ pockets. But making these tough choices is what we need now. Where are our national leaders?

And if elected officials can’t make these decisions, no one will. The average citizen is not equipped to decide on government finances, just witness California.  For the last half-century the finances of the Golden State have been ravaged by direct citizen-government. That state’s ballot initiative system allows for plebiscites on specific programs. What this has resulted in is a citizenry voting for myriad programs, which are then guaranteed by law, but also voting for rules that make it very difficult for the state legislature to pass taxes to pay for them. California government is widely viewed as dysfunctional and annual state deficits are in the tens of billions of dollars (more than $26 billion last year). Drastic cuts are already taking hold at the local level, how much longer before they affect the whole state?

On the national level, the reality is that a lot more than the minimum $1.2 trillion needs to be cut from spending over the next decade. Maybe three or four times as much to keep the deficit from growing. But what the results of today, and the performances we’ve seen from the previous and current President, and the five Congresses over the last decade, suggest that what we’ll actually get is more of the same; right up until true disaster looms.

Cynicism and Apathy
It’s this type of government that leads to widespread cynicism about Washington. There is an old expression that cynicism only masks a failure to cope. That might be so, but how else are rational, pragmatic observers supposed to react to a federal government that seems intent on mismanagement? Politicians get away with breathing hollow rhetoric and breaking promises. How can the common citizen not be discouraged at such a situation?

Money - the lifeblood of politics
In the end I’m not all that surprised at the result. I thought that maybe with all the light on the Super Committee the members would feel pressure to produce results. But the bottom line is that the present spendthrift system works too well for politicians. Lavishing money on favored programs and eschewing all forms of tax increases is a path to reelection. And it’s the rare Senator or Representative that leaves Washington less wealthy than they arrived, and fewer still that spend their post Congressional years in anything less than easy material comfort. I wince when I hear any of my fellow citizens talk about politicians as heroes or speak about them with reverence. There are true leaders out there, but for every Abraham Lincoln or Winston Churchill there must be a thousand self-interested politicians. It’s in a word, disheartening.

That’s enough of my indignation. I hope I don’t have to write about politics again anytime soon.

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