Category Archives: Debt and deficits

Starving the beast only made it hungrier

Debt and deficits, Politics, U.S. Congress

By Steve Brawner
© 2015 by Steve Brawner Communications, Inc.

Some time in the 1970s, the Republican Party pledged allegiance to a strategy known as “starve the beast,” which said that the way to reduce the size of government was to reduce the taxes going into it. President Reagan in 1981 used another metaphor: reducing children’s allowance. Democrats, happy to increase government without paying for it, largely acquiesced.

That gentlemen’s agreement has led to a sustained period where government has collected much less in taxes than it’s spent. In 1980, the national debt was less than $1 trillion. Today, it’s more than $18 trillion.

The strategy obviously didn’t work. In fact, starving the beast has only made it hungrier, for two reasons.

One is that government is not a child, and it’s not bound by the same rules as the rest of us. It does not need an allowance because it can always forcibly borrow from the future – until that day, which is coming eventually, when something will happen so that it no longer can.

It also didn’t work because of a fundamental principle of economics those starve-the-beasters should have known, which is that people typically buy more of something when it’s cheaper, and less when it’s more expensive.

Since 1980, the United States government has outspent the Soviet Union to win the Cold War and has fought many other “hot wars,” including the unending ones in Iraq and Afghanistan. Spending on Social Security, Medicare, Medicaid and other government health care programs has ballooned.

As a percentage of gross domestic product, government spending is about the same as it was in 1980. But that’s a mirage. Very expensive, unbreakable promises have been made to seniors, federal pensioners, and health care recipients that will cause government to grow. Money that should have been invested in the Social Security and Medicare trust funds to prepare for the retirement of the baby boomers instead was spent elsewhere. Meanwhile, important investments in other areas have been delayed, such as maintaining the nation’s highways and bridges.

Why did the American people allow all of this? Because we haven’t felt the costs of our decisions enough to demand change. In fact, we’re the ones who demand that the status quo continue, and why wouldn’t we? Year after year, we’re getting government at a huge discount at our kids’ expense. We don’t want to pay full price, and we punish those elected officials who ask us to do so.

“Starve the beast” doesn’t require hard choices or ask Americans to take responsibility for their actions. Just cut taxes (“Yippee!) and the government will sort of lose weight on its own. It works for everyone: Republicans, Democrats, and average Americans – everyone, that is, except future taxpayers.

Unfortunately, “starve the beast” is not only alive and well, but it remains Republican Party orthodoxy. Many Republican elected officials, including many Arkansas state legislators and the state’s entire congressional delegation, have signed the Americans for Tax Reform’s “Taxpayer Protection Pledge” stating that they won’t raise taxes. Meanwhile, they did not sign a corresponding “No more spending pledge.”

In other words, we do not promise to keep government from growing, but we do promise not to pay for it when it does. See the problem?

The only way the government will stop growing is if we actually start paying for it. No one wants to pay more taxes, including me, but – and it will probably take a balanced budget amendment to make this work – we should pay for the full cost of the government we have chosen to create. We also should start paying down the debt we’ve already accumulated.

The thing about taking responsibility for your actions is that it makes you change your actions. We should feel the effects of big government every time we collect a paycheck and every time we go to the store. Never again should a war be fought where civilians pay no extra cost. If taxpayers start paying the full cost of government, then it almost certainly will shrink. But If we decide we like big government, at least we’ll admit it and pay for it honestly, without all the debt and hypocrisy.

It’s time to finally realize, after all of these years, that WE are the beast. We’re the ones getting fatter, at our children’s expense.

When will we realize it? When we actually pay for our government – and give ourselves a chance to start feeling full.

Can states save the federal government?

Debt and deficits, Legislature, Politics, State government

By Steve Brawner
© 2015 by Steve Brawner Communications, Inc.

Common Core cover cutoutThe thing about human nature is that we resist the big change until there’s a crisis, even though we know a crisis is inevitable if we stick with the status quo.

It often takes a diagnosis for us to quit smoking or change our diets. Some alcoholics must lose everything before they’ll finally seek help.

On the other hand, some people do make lifestyle changes before they absolutely must. Can a society do the same?

On March 2, the national debt stood at $18,149,954,531,765.07, according to the U.S. Treasury Department’s website. That’s $57,000 per American.

The government has been in debt since 1835, but the numbers have been soaring lately. It took two centuries to reach $1 trillion in 1980 and then 35 years to add $17 trillion to that.

There have been a few years when the government did not add to the debt, but not many. Debt has been an ever-present part of America’s past – and unfortunately, its foreseeable future. The federal government’s own Congressional Budget Office predicts the debt will increase $7.7 trillion over the next 10 years. The debt then will continue to rise because of the government’s many unfunded promises.

Someday there will be a reckoning. You can’t keep adding debt forever. And yet Washington seems incapable of stopping this train wreck from happening. So can the states do it?

In the State Capitol on Wednesday, the House of Representatives voted to advance the Compact for a Balanced Budget, a national effort to amend the U.S. Constitution. It now goes to the Senate.

The Constitution has been amended 27 times, the first 10 amendments being the Bill of Rights. With each amendment, Congress has initiated the process.

However, under the Constitution’s Article V, the process can be initiated by states instead of Congress. Thirty-four states must agree to a call, Congress must make the call, the delegates must meet to propose amendments, and then 38 states must approve those amendments. It’s never been done before.

The Compact for a Balanced Budget spells out exactly what the convention would do and how it would do it. Delegates would vote for a single amendment saying the government cannot spend more than it collects unless it borrows under a debt limit that can be increased only with approval by state legislatures. It also requires a two-thirds vote by Congress for most tax increases.

The previous day, the House voted against a resolution advancing the Convention of the States, another national effort to amend the Constitution through the Article V process. That effort would let delegates consider a balanced budget amendment but also others that would limit the government’s power and scope. Supporters tried again on Friday and narrowly passed it through the House. It now goes to the Senate as well.

I like the Compact’s approach much better, but I understand why people are opposed to both. A balanced budget amendment could rob Congress of the flexibility it needs in a crisis. It could be ignored. Or it could give the Supreme Court an outsized say in taxing and spending matters. Clearly, the Convention of the States is a conservative movement meant to reduce the size of the federal government, which many Americans don’t really want to do.

Other arguments against the Article V approach are not as persuasive. Some fear a “runaway convention” where delegates make scary changes to the Constitution. That’s hard to imagine. Remember, whatever the convention proposes must then be ratified by 38 states, one at a time. It’s far more likely the process either would produce nothing, or something so watered down as to be meaningless.

Some are opposed to amending the Constitution because they say it is just fine like it is. Thank goodness that argument didn’t carry the day before passage of the 13th Amendment, which abolished slavery, or the 19th, which ensured women have the right to vote.

The framers of the Constitution gave us a wonderful document, but it has become increasingly obvious since 1835 that it contains a flaw: The government has many incentives to create debt without a mechanism to discourage it. Thomas Jefferson recognized that flaw in 1798.

The framers also understood their own imperfections, and humanity’s, as well as the fact that times change. That’s why they made it possible to amend the Constitution, with great difficulty.

They wisely included the Article V provision. Congress can’t always be trusted, so a democratic process was needed to bypass it – before a crisis occurs, preferably.

Is America governable?

Debt and deficits, Education, Health care, Politics, State government, U.S. Congress

By Steve Brawner
© 2015 by Steve Brawner Communications, Inc.

U.S. Capitol for blogThe American republic has limped past being dysfunctional and stumbled into being ungovernable. Even if you hate the government, this situation should concern you because it means big problems aren’t being addressed, while new ones are being created.

Two current legislative fights illustrate this reality – No Child Left Behind and the broken immigration system.

Congress has yet again stalled on its long overdue reauthorization of No Child Left Behind. That’s bad, because this law is completely unworkable. Signed by President George W. Bush in 2002 and passed with bipartisan support, it required that 100 percent of American students in grades 3-12 test at their grade level by the end of the 2014 school year, or the federal government would punish the schools where they didn’t. That’s every single child, regardless of language difficulty or intellectual challenge – a requirement so ridiculous that Congress ought to fix it, but it can’t. As a result, the Obama administration has been granting waivers to states telling them how they can disobey the law.

The president is supposed to enforce the law, and Congress is supposed to write laws that make sense, right?

The same applies to immigration. The president wants to ignore the laws Congress has passed, and Congress can’t agree on how to fund the Department of Homeland Security in response. Meanwhile, the border remains porous, and millions of people live in the shadows among us. Children brought here by their parents basically have no home country. Meanwhile, the United States quite effectively limits the influx of skilled overseas workers – exactly the people we need.

If these two issues were outliers, we could deal with them. Unfortunately, they’re the norm. A few other examples …

The national debt. Uncle Sam now owes $18 trillion, or the equivalent of $57,000 for each American. The debt has doubled since 2007 and tripled since 2001, and it’s still rising. The only possible solution is to reduce spending substantially while collecting more revenues somehow. There’s not a remote possibility that Republicans and Democrats in Washington will agree to do that.

Health care. Prior to the Obama administration, the United States already had the world’s most expensive health care system. It denied insurance because of pre-existing conditions and stopped paying for patient claims if they became too expensive. Then the Affordable Care Act was rushed through Congress, causing its own problems and leading to who-knows-what. Now the act faces a serious Supreme Court challenge over its wording regarding federal exchange subsidies. Pulling this leg from the stool could cause Obamacare to collapse. Lots of people would be happy about that, but … what’s the plan after that?

Infrastructure. The gas tax, which funds highways, has not been raised at the federal level since 1993. It is destined to produce less and less revenue because cars are becoming more fuel efficient through both market and government demands. Everybody knows the model is unsustainable, but there’s no agreement on its replacement.

It won’t be enough to vote for different people in 2016. Washington simply doesn’t work any more, regardless of who is in office.

That’s because Washington reflects American society, which itself is marked by contradictions and divisions. We simply don’t agree on how to solve problems, or even about what the problems are. We’re deeply divided culturally, morally, about what we want this place to look like, and about what we think it once was. That lack of consensus makes it very hard to solve difficult issues. Moreover, Americans say they don’t trust government but then choose to be profoundly dependent upon it, rarely recognizing the irony. The result is that we grow government without paying for it.

This is a depressing column, so let’s close with solutions. Congressional term limits? A balanced budget amendment? Campaign finance reform? All could help.

Meanwhile, many decisions should be returned to the state level, where democracy still manages to work sometimes. Red, blue and purple states could solve problems in their own ways, often learning from each other. Americans would be free to settle in states where they felt most comfortable.

This could cause its own problems, including irreconcilable legal definitions of discrimination and a race to the bottom on environmental regulations. A poor state like Arkansas might find its niche, or it might just get poorer.

Something big has to happen – bigger than the next election. When a country becomes ungovernable, problems can’t be solved simply by electing different people to that government.

Here’s some hopeful news on the national debt

Debt and deficits, Politics, U.S. Congress

By Steve Brawner
© 2015 by Steve Brawner Communications, Inc.

If you’re a person who reads this newspaper section or clicks on this column online, you’re probably aware of the national debt and maybe a little concerned, but you’re not crazy about reading 700 words about it.

I get it. The numbers are mind-boggling and the terms confusing. Could there be any more boring words than “federal budget” and “fiscal responsibility”? We’ve been hearing about this bear in the woods for decades, but he never seems to attack.

But a couple of important things happened this past week – one hopeful, one less so – that are worth noting, so let’s cover them. Bear with me. We’re already at 110 words.

Let’s start with the less hopeful news. The Congressional Budget Office (CBO) released its 10-year projections Monday, which told us what we already knew, which is that the debt is growing unsustainably. Already $18 trillion ($57,000 for every American), the debt is expected to grow to $27.3 trillion by 2025.

Each year, the government runs a deficit that adds more to the debt –about $1 trillion every year during the recession, less so in recent years. In 2014, the government added “only” $483 billon to the debt, and the next three years will be about the same. But then the deficit starts rising. By 2025, the government again will spend more than $1 trillion over what it collects that year.

The CBO reports are typically a good information source, but they are based on some rosy scenarios – for example, that Congress won’t extend tax loopholes that it always extends. Forecasters assume there won’t be a terrorist attack, a natural disaster, or a significant economic downturn between now and 2025. On the other hand, unexpected good things can happen as well, such as the United States’ increasing energy independence.

The CBO projections stop at 2025. The picture does not improve moving forward as the baby boomers age and as spending increases for Social Security and Medicare.

And Medicare is where we get to the hopeful news. The federal Department of Health and Human Services announced this week that it will rely less on the “fee for service” model that has helped create runaway health care costs. Under that model, doctors and hospitals are paid for whatever services they render. They bill, and taxpayers pay, few questions asked, creating an incentive for unnecessary tests and procedures.

In the future, alternative models more often will pay medical providers based on quality of care. This is very hard to do, but it has been tested. Little Rock’s CHI-St. Vincent has been involved in a Medicare pilot program where the hospital and doctors were paid a set amount for joint replacement procedures, and it was up to them to control costs to make a profit. I know we don’t like to think of health care in terms of profits, but the alternative is a government bureaucracy. The result of the pilot program was that patient hospital readmissions after those procedures were reduced by two-thirds. When I asked the hospital’s reform-minded CEO, Peter Banko, why the changes had not been made earlier, he said, honestly defining the problem, “There was no financial incentive to.”

“Until you change how we’re being paid, you’re not going to see changes in the system,” he also said.

At the state level, Arkansas has been involved in a similar effort, the Arkansas Health Care Payment Improvement Initiative, which involves Medicaid, insurance companies and others. As part of the initiative, medical providers have financial incentives to keep costs at certain levels for particular “episodes of care.” One result, according to the Arkansas Center for Health Improvement, is that unnecessary antibiotic prescriptions for certain respiratory infections have decreased 17 percent. Doctors now have a financial incentive not to prescribe medicines that serve no purpose other than making patients feel like something is being done.

These are not perfect solutions. They’re very top-down in a health system that has been becoming increasingly top-down for decades.

But they are hopeful. It is impossible to balance the budget without controlling health care costs. If that could happen, it would be one of those unexpected good things that might mess up CBO’s numbers, in a good way.