Interesting takes on Government Fiscal Policy

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An interesting thing about being a teacher --especially a college professor-- is how your students become adults and go into the workplace and have interesting opinions about things. Depending on how successful one has been with encouraging divergent opinions, they continue to be comfortable disagreeing with you on forums like, say, FaceBook.

Last night I posted there a link to Jon Stewart’s fascinating conversation with Austan Goolsbee.  I urge readers to watch that clip; it is a very informative and illuminating conversation about the broad principles of government intervention, and fiscal policy generally.

A student of mine, working in the financial sector, a double actuarial science and economics major, wrote a comment saying:
“I was disappointed actually.  The equation

(Tax Cuts) = (Growth) 

was not the one to discuss.  I think it has to be

(Tax Cuts) + (Social Policies and Spending) = (Growth). 

What he said was rather misleading... I wish he had talked more about other factors.”

This comment illustrates how these sorts of discussions have an enormous number of background assumptions that are crucially important to recognize.  I'm not exactly sure about where he is employed, and at what level, but having observed him for four years, I am willing to bet that his grosses in the vicinity of $200,000, but brings home a lot less.  This puts him close to the top 20 to 25 percent of earners in the USA who instinctively side with the so-called 1%, even though they’re not close to that select few.  If a member of the so-called 1% does not have offshore investments, he would be bringing home something dangerously close to what my friend brings home, after paying out salaries and expenses.  (I don’t really know; I can only guess at the lifestyles of these people.)

I responded:
“The equation they were discussing actually was

(Tax Cuts) + (Deficit Reduction) = (Growth).

I guess they could have talked about

 (Tax Cuts) + (Deficit Reduction)+ (Social Policies) = (Growth),

but  I don’t think it could have gone anywhere!”

Now the cards were really on the table; he had revealed himself as a fiscal conservative by insisting that a review of social programs must be on the table, while Jonathan Stewart and Austan Goolsbee and I had assumed that social programs were not negotiable. This is part of our strange (Liberal) morality, that we should be willing for the entire population to fund social programs that we are individually not willing to take the entire responsibility for just by ourselves.  Churches and Boy Scouts and Goodwill and American Rescue Workers and the Red Cross cannot take on the entire burden of social welfare on a voluntary basis.  It’s just plain uncivilized.

But he had left out the elephant in the room: Deficit Reduction.

True fiscal conservatives and old-fashioned economists are nervous about the deficit. All Economists agree that unless Government debts to private financiers are paid eventually, there will be inflation. (Government will have to print more paper money to pay back the loans, and each paper dollar will be worth less. This happened during the Carter presidency, and everyone was very unhappy.) So my friend, together with all the fiscal conservatives in the GOP camp, should be just as concerned with deficit reduction as they are concerned with lowering taxes. The former principle has to do with the health of the Government, and of course, indirectly to do with the true value of the stocks and the savings of the upper-crust. Reducing Taxes has to do with two things: giving the Rich more true income, and reducing the voter base of the Democrats. The urban poor have voted with the Democrats. If social spending is reduced, the GOP party insiders know, the poor will lose their faith in Government, and just not vote.

On the face of it, though, both Deficit Reduction and Tax Cuts sell well with the GOP base for any number of reasons.  Goolsbee and Stewart were simply pointing out that the Romney - Ryan plan just could not do both at the same time.  Nobody expects a plan to come out of the GOP that will do both; the fact that they’re claiming to have such a plan simply means that they’re lying.

But wait; they might be planning to completely decimate the size of the Military.  If they lay off a lot of the higher-level military generals, they will save a pile on salaries.  (This is not outside the realm of probability; a lot of top brass are Democrats.)

They might be planning to completely shut down Health Education and Welfare.  That will make many conservatives happy, but will not reduce the deficit at all.  The deficit is growing because high-income taxes have been lowered, but Defense spending has grown.

They might be planning to raise taxes on the Middle Class.  They almost certainly are.

They might be planning to privatize Social Security, Medicare, Medicaid, etc, etc.  The deficit will still not be reduced by very much, and a lot of senior citizens will get sick and die. This will be a huge problem for the members of the Baby Boom generation that (A) is getting ready to retire, and (B) has lost a lot of savings in the Stock Market.

Well, I’m all talked out. It was clear to the faithful (of both the major parties, I’m fairly sure) that the GOP was being less than candid with their budget plan. But that’s the mindset of the GOP: we want to run the country like a business, and it is not the tradition with business to share business strategy with everyone. So they can stand a lot of not-candidness just to get into power, and then their religion tells them that the party bosses will deliver for them by some miracle.

See, that’s why I’m an atheist!

Arch

P.S.

The liberal newspaper The Economist has a more objective (or cynical) angle on the
President’s acceptance speech than mine.  Their opinion is that Obama was making an appeal to undecided voters (which he probably was, among other things). 

The most succinct and persuasive portion of the article is its ending:

The smartest bit of the speech dealt with the slightly cartoonish argument about the role of government that has dominated both party conventions over the past fortnight. The Republicans called government a menace that should simply “get out of the lives” of hard-working businessmen and ruggedly individual entrepreneurs. The Democrats, on the other hand, seemed to suggest that government benevolence was a more reliable protector of the rights of the little man than the profit motive. It is not either/or, Mr Obama argued. That this simple observation represented a marked raising of the rhetorical tone is a measure of how shrill the debate has become. His words amounted to a rebuke of angry partisans in both parties:  [Emphasis mine -- Arch]

    “We don’t think government can solve all our problems. But we don’t think that government is the source of all our problems—any more than are welfare recipients, or corporations, or unions, or immigrants, or gays, or any other group we’re told to blame for our troubles.”


--The Economist.

The quote at the end of the excerpt is a good one, and one that I had forgotten. In retrospect, it is an excellent characterization of the role of government as seen by progressive Democrats, not the superficial Democrats who join the liberal bandwagon without a clear apprehension of whether or why the political ideals of the Democrats makes sense at this time in history, and for the last several decades.

A.

[Afterword: the Media (well, some sources, anyway) panned President Obama's acceptance speech as "Same old, same old."  Well, it certainly was the same old President Obama; no plastic surgery, no extra make-up.  It was the same old well-thought-out ideas and tactful and polite presentation. I can't believe that Obama is accused of being rude; he disagrees vehemently, but I can see no rudeness at all! But in my opinion he is extremely articulate in presenting the Democrat ideas: concise, succinct, unambiguous.  Just read the last paragraph above!

Democrats do not --any longer, anyway-- want Government for its own sake. We want government to do precisely what it needs to do: accomplish the things we cannot individually accomplish by ourselves, such as set up the rules, provide infrastructure, watch out for consumers, facilitate commerce, defend against lawlessness and external threats, negotiate with other nations, provide a safety-net for the poor and powerless. Most of these things are important to the most wealthy members of our nation, even if they choose not to recognize it. Yet they want these things to be accomplished with no financial resources whatsoever. The GOP and the conservatives have given over to rhetoric completely, and sacrificed all attempts at logic.

A.]