Among those who observe the culture of Washington, D.C. you will hear reference to the “Washington consensus,” the common beliefs of the so-called Very Serious People who subscribe to these core ideas. Among the most enduringly and widely held of these consensus views is that the deficit of the federal government is an ongoing crisis, destroying the […]
Among those who observe the culture of Washington, D.C. you will hear reference to the “Washington consensus,” the common beliefs of the so-called Very Serious People who subscribe to these core ideas. Among the most enduringly and widely held of these consensus views is that the deficit of the federal government is an ongoing crisis, destroying the country, a crisis caused by “runaway spending” and that it is the duty of all patriots to “make the tough choices” to limit spending.
This is so ingrained that it even gets expressed when reporting evidence that directly contradicts it. As an example, consider the article, “Blues Brothers,” appearing in the March 10 issue of Bloomberg Businessweek.
Simpson & Bowles
In 2009, President Obama appointed the bipartisan National Commission on Fiscal Responsibility and Reform to come up with a plan to “fix” the budget. This commission was co-chaired by Alan Simpson, a former Republican Senator, and Erskine Bowles, a prominent Democrat official who was chief of staff for President Clinton.
The commission, popularly known as the “Simpson – Bowles” commission, met throughout 2010 and eventually produced a plan, modestly entitled “The Moment of Truth,” that has become widely known as the “Simpson – Bowles plan.”
The Moment of Truth states: “Our nation is on an unsustainable fiscal path. Spending is rising and revenues are falling short, requiring the government to borrow huge sums each year to make up the difference. We face staggering deficits. In 2010, federal spending was nearly 24 percent of Gross Domestic Product (GDP), the value of all goods and services produced in the economy.”
The plan was intended to significantly reduce the federal deficit. To do that it proposed many spending cuts and some tax increases. The members of the commission couldn’t even all agree on it, and Obama and Congress let the plan drop.
The Businessweek article, subtitled “Why won’t anyone listen to Alan Simpson and Erskine Bowles?” recounts their tireless efforts to promote their plan.
The first clue that we have a problem comes innocuously enough with a story about how people pay $40,000 to hear the two speak. Corporate CEOs seem to be a major component of the audience, and then Joshua Green, the article’s author, describes this PR campaign as an effort to “awaken the slumbering masses”— seemingly unaware that the audience he has described is not at all part of “the masses.”
Concern about the deficit eating the nation is long standing. The article terms it an “apocalypse,” noting that the alarm first sounded in the 70s, then citing a 1982 article warning about Social Security and a 1987 article warning about entitlement spending. In other words, the looming disaster has been apparently just around the corner for 35 years and more and is still, just around the corner. That we have survived 35 years without it arriving might raise a question as to the accuracy of these warnings.
Simpson has also been worried about deficits for years, and he is quoted as complaining that, during the Clinton administration, no one would listen to his warnings and he poked fun at people who get “emotional” when you argue for cutting entitlements. But in Clinton’s last years in office the budget was in surplus, and there was even talk that the surpluses were going to be a problem in years to come, with speculation that the entire debt would be paid off. Perhaps that had something to do with why no one wanted draconian cuts in entitlement programs, not silly emotions?
It’s Obama’s fault the Republicans will say no?
Simpson is often mad at both parties, but is quoted at being especially angry at Obama who told Simpson that there was no way to pass the Simpson – Bowles plan, or any plan, because the moment Obama endorsed it, the Republicans would reject it. Later the article explains how Simpson, a lifelong Republican, isn’t considered a real Republican by the increasingly right-wing Congressional Republicans and the Tea Party people. Those conservatives will pass nothing like the Simpson Bowles plan. But somehow that is Obama’s fault in Simpson’s mind.
Just as we skipped from Clinton to Obama, so does the article. The Bush years — when massive tax cuts and an unfunded major war actually did blow up — the deficit is passed over in silence. Likewise, the apparent solution: wind down the war and repeal the Bush tax cuts is never mentioned or assessed for its impact on the deficit.
The article points out that it is natural for corporate CEOs to buy into the plan to cut spending. If a company gets in trouble, they lay off workers and close plants. Why shouldn’t the government do the same? This is a very telling view. Workers laid off from a company can, much of the time, find another company to work for and can rely on unemployment benefits, and, if they have to, Medicaid and Social Security from the government. When the government effectively “lays off” millions of people from social programs, there is no other government just down the road for them to apply to.
What the remark reveals is that the unemployed, the poor aren’t really considered the problem. What counts is “the budget,” but not the citizens who are either helped or hurt by it.
It’s the (actual) economy
An extended passage from the article is worth quoting for how it so reveals the flaw in this sort of thinking: “The outside strategy to persuade the public has also fallen short. It depended on scaring people into believing that a crisis is imminent. For all their resources and the attention they garnered, they haven’t managed to do that. Millions of Americans are more anxious about jobs, stagnant wages, slow growth and a host of other problems. Simpson’s gleeful attacks on safety-net programs like Medicare, while perhaps rational from a budgeting standpoint, can’t have done much to win them over.”
How silly of us to be worried about not having a job, not paying the bills, having no hope for future raises on our jobs when we should be worried about a crisis that hasn’t come for 30 years.
And even worse for Simpson and Bowles, the crisis is actually receding. There is no spike in interest rates, despite constant warnings that this was just around the corner, there is no inflation, and the deficit as a percentage of the budget is actually going down. In other words, the United States has time and space over the next couple of years to be worried about jobs and growth. Growth that would produce more tax paying citizens and further reduce the deficit.
You need a plan
If you’re going to fix a problem, you need a plan. If there is any potential threat that could break the federal budget in the long term, it is the increase of health care costs above their already high levels. Even if this doesn’t lead to a meltdown, the amazingly high cost of U.S. health care is a drag on our economy and the budgets of millions of families.
The only problem, as the article says, is that when it comes to controlling health care costs “nobody is quite sure how to do this, or even if it’s possible.” Nonetheless, Bowles is quoted lamenting Washington’s inexplicable refusal to solve a problem that no one knows how to solve.
We all organize our world by a series of mindsets or frames. We fit what we see into our system of beliefs. We dismiss data that disagrees with our frame and notice and remember the data that reinforces our frames. But if we are rational and honest, we eventually notice when there is a lot of data contradicting our framing of the world.
Many people in Washington, especially those Very Serious People, haven’t noticed.