The Perils Of Debate On Fiscal Issues

There are two things on which our colossally polarized political parties do seem to agree this year: first, we face a highly consequential election; and second, the key issues are the economy and the (closely related) federal budget.  Accordingly, many pundits are calling for a thorough and complete debate.  “Fully specified budget plans at 20 paces!”

In principle, the nation should debate what may be our most consequential issue in the course of electing our President and Congress.  But can this nation, at this time, stage such a debate?  And if we did, would it be constructive?  The answers are far from obvious.

The pertinent questions might fall into three categories:  What are the ground rules for the debate?  Who is the umpire?  And are the ultimate judges – the American people – well prepared?

It is tempting to say that if the political world could agree on the ground rules for the budget debate, it would have solved the problem.  That overstates the case, but it is not far off.  The two political parties routinely and consistently talk past each other about the answer because they do not agree on the question.

While budget wonks worry about the annual deficit and the accumulated debt per se, those terms, to the two political parties, are often code words for the size of government.  On the one side, policies that shrink government spending are the goal, even if accompanied by other policies that reduce tax revenues even more.  On the other end of the spectrum, the goal can be for government to do more, without regard for the consequences for the deficit and the debt – which are of lesser importance, if they matter at all.

And as discussion gets a little deeper, the reason for these different preferences becomes clearer.  Supply-side-ism is rampant across the political spectrum.  The conservative extreme is certain that lower tax rates increase tax revenues – no matter how low tax rates already are, and whatever the experience of rising debt in the 1980s and the 2000s.  But less widely recognized, the liberal fringe believes that building and paving roads will make the economy grow faster – rather than just getting harried commuters home two minutes earlier for dinner each night.

Once supply-side-ism enters the debate, there arise sharp differences over even the size of the problem.  Even if the two sides agree on a target size of the public debt as of a target future date, they will disagree on the amount of savings needed for a solution.  The inevitable perception is that once the tax cuts (or the infrastructure investments) grow the economy, part of the problem disappears.  And the more supply-side feedback you claim, the less other painful medicine you need to swallow, making your package of proposals more attractive than your ideological adversary’s.  It would not be shocking if some more-reasonable people on both sides of the political spectrum are so offended by the perceived supply-side abuse by the other side that they feel compelled and empowered to play the same game.  Thus, there probably can be a race to the bottom on something so abstruse as budget scoring – which does not bode well for a constructive debate.

So how do you stage a debate about how to reduce the arithmetic gap between spending and revenues between two parties that cannot agree on the rules of arithmetic?  That is why it is crucial to have an objective umpire to moderate the debate.  But if choosing the umpire is tantamount to deciding the debate, how will we ever get the two sides to agree on an umpire?  There are very few people who know these issues but have not landed on one side or the other of our ideological continental divide.

I used to think that ideal nominee for any such role in Washington would be Albert Einstein.  Washington demands people of demonstrated brilliance and competence, but who have no identifiable views on the issue being decided.  Apart from the minor drawback of being deceased, I thought that Einstein would have filled that bill perfectly.  But then I learned that Einstein had a record of socialist opinions.  One more great idea down the tubes.

Too bad, too, because sometimes the skills of an Einstein are called for in budget scoring.  Take health care as an example.  CED has recommended cost-responsible consumer choice among competing health-insurance plans as the best way to reduce costs.  But ask me (or the Congressional Budget Office, or anyone else) how much money a specific program of that nature would save, and I must answer in honesty, “I don’t know.”  In the simplest terms, this policy approach would put competition and the marketplace – the “invisible hand” – to work at stimulating innovating and reducing health costs (while maintaining quality).  But budget scorekeepers cannot measure the invisible hand.  Why?  Because it is invisible.  No one knows what innovations will come down the pike in future years.

The same is true on the other side of the ideological spectrum, among those who prefer government-driven ideas through institutions such as the Independent Payment Advisory Board (IPAB).  What savings will come from the IPAB’s ideas?  No one knows that either, any more than they know what savings would come from competitive choice among insurance plans.

So how frustrating would it be to have the umpire in an election-campaign budget debate call “I don’t know” at home plate?  And we could not resort to instant replay – because what we really are asking the umpire to call is not the previous pitch, but the next pitch, plus pitches two through 10, plus often enough the next 65 pitches to give us the long-term outlook.  And it is just as hard to convey to impatient policymakers, and to the public, that even the budget-scoring umpire does not have all the answers – but that the policymakers must make their own painful decisions anyway, and accept electoral responsibility to boot.

For those who believe that the budget problem is large enough to require a bipartisan solution – with give from one side on revenues, from the other side on Medicare, and from both sides on everything else – this debate would be frustrating to watch.  As both sides make unverifiable claims which stump even any unfortunate official umpire, with distrust and suspicion on both sides, only experts would be likely to have any confidence about what truly was on the table.

And that casts doubt on whether the American people truly are ready for this debate.  Budgets are enormously complex, both in terms of the technical questions relevant to each and every program, and in the massive number of programs involved.  There are reasons why people hire accountants.  There are reasons why people, too, hire budget experts – although the people generally trust the accountants.

Political science makes reference to the roles of the “interested minority” and the “disinterested majority.”  In many budget issues, a small number of people each receive substantial benefit from a questionable program, but the per capita savings for the rest of the population from elimination of that program are quite small.  The interested minority will work intensely to preserve their program, while the members of the disinterested majority each have little reason to care.

So suppose that some party in the public debate actually played the game perfectly straight, and put forward their best and final offer of a budget reform plan.  The other side would outbid it by using supply-side pixie dust to drop the most politically painful proposals.  And then the many small groups that would lose benefits from repeals of spending programs or tax preferences would shoot that “trial balloon” full of holes, discrediting many of the individual proposals in the public mind.  That would not be hard to do.  “Americans for National Security” would run expensive ads explaining why any procurement termination would open the continental 48 to invasion.  “Americans for Energy” would show how the elimination of any subsidy would force people to read by candle light (without acquiring the wisdom of Lincoln in the process).  And “Americans for Candles” would argue that the foregoing change would raise the cost of religious ceremonies.  By the time the dust had settled, many of the best and most necessary ideas for deficit reduction would have been demonized and rendered politically radioactive.

We all believe in open and full debate in our democracy.  It is painful to think in contrary terms.  But if ever a crucial public issue cried out for a smoke-filled room, this is it.  Get the smart guys in both parties, out of the view and earshot of their political bases, to agree on the size of the problem and carve up their own oxen in pieces of equal mass to cut the deal.  And then hope that they can get enough of the elected policymakers on their ideological wings to see the principle in expediency.  There is no other way.

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