Friday, December 28, 2012

Fake Centrism, Part 2

-- Posted by Neil H. Buchanan

The abstract of a recent paper by a young tax scholar states as an uncontroversial premise that "fundamental tax reform ... is a necessary part of any solution to the looming budgetary crisis."  This is false.  Whether the author is referring to short-term budgetary issues, or (as seems clear from the context) to the long-term budget picture, fundamental tax reform is simply not a necessary part of any solution.  Fundamental tax reform can take many forms, some of which might be good ideas (while others are surely bad ones), but they are not a necessary part of solving any budget crisis that might be worrying us.  (It is also not clear that there is a looming budgetary crisis at all, but I digress.)

Why would an excellent young scholar make such a basic factual error?  Because so many other papers include the same error.  Even when tax scholarship really has nothing to do with budgetary issues (when, for example, an author is concerned about how the tax system affects air quality, or housing starts, or international trade), it is common to blithely make some reference to "solving the deficit problem," "addressing fiscal doom," "forestalling the coming national bankruptcy," or similar apocalyptic language.

So, the error is common because the error is common; but how did it become common?  My usual answer is that there are macroeconomists who constantly push anti-deficit and anti-spending agendas, and they are able to convince a gullible press and political culture that "governments need to live within their means," and all that rot.  There is, however, less truth to this than people like me usual admit.  We also know (but, I think, try to ignore) that there is a major industry of "deficit scold" organizations, which are the major political drivers of the anti-government presumptions that seep into every aspect of policy discussions.  These organizations employ some economists, but the causation runs from the scolds to the economists, not the other way around.  Without serious money from the scolds -- for research grants, and buying public relations campaigns that promote the economists and their work -- I have no doubt that most of the economists would find other things to write about.

In my Dorf on Law post yesterday, I argued that the central problem facing the U.S. as 2012 ends is the relentless (and relentlessly wrong) barrage of media commentary that says that both sides are at fault in all of our political standoffs.  Yesterday's post took the "false equivalence" argument and broadened it to encompass a critique of the idea that there is always something better about "meeting in the middle," no matter where that middle is.  That is Fake Centrism.

The budget/spending/deficit debate is where this fake centrism has been distilled to its pure essence.  As noted above, however, this was anything but an organic process.  Consider a shameless puff piece in The New York Times earlier this week, profiling the woman who runs the new Fix the Debt scold group, Maya MacGuineas.  The article reads like one of those "60 Minutes" bits from the 80's showing, say, Leona Helmsley's sweet side, or a Barbara Walters interview with a celebrity trying to prove how wonderful he is.  Without the money and DC-insider political clout that is behind Fix the Debt, there is no way this piece ever would have run, much less been so one-sided.

MacGuineas is, in fact, the head of a longer-running scold group, the Committee for a Responsible Federal Budget.  (These groups all seem to have Orwellian names.)  The article paints her work there, and in the years before she landed there, as a long slog of thankless work trying to make deficits an important issue, "imagining a day when a president and a Congress might finally work together to curb deficit spending."  Despite recent disappointments, she is "troubled but undeterred."  The article later quotes MacGuineas: "For the longest time, nobody cared, nobody listened. ... It was 15 years of irrelevancy."

What planet is this article being reported from?  Two years ago, when the Bowles-Simpson commission was sputtering to its inevitably ignominious conclusion, I wrote a post here commenting on the fake martyrdom that so many deficit scolds adopt.  "We're so unpopular," they say.  "No one wants to hear what we have to say, but what we have to say is just too important to the future of mankind for us to be polite any longer."  In fact, one of the easiest jobs in the world must be going to work every morning with the mission of getting an audience in Washington while one talks about how important it is to shrink the government.

The Bowles-Simpson comparison here is hardly accidental.  MacGuineas's groups include both Bowles and Simpson in various leadership roles.  The NYT article also describes how easy it was to get Fix the Debt going.  MacGuineas -- who is described simply as a DC lifer, with no actual qualifications to talk about budget issues, other than having talked about budget issues for various scold groups and insider organizations for fifteen years -- just happened to be able to get a bipartisan group of politicians together with some supposedly public-spirited CEO's, hoping to maybe raise a measly few million dollars to start yet another anti-deficit campaign.  When the "impassioned feeling of a 'tent revival'" (in the words of host Democratic Senator Mark Warner) began to emerge, they raised $43 million.  Life is tough for these Cassandras.

These are the same people who believe, notwithstanding all of the evidence that finally came into focus during the Presidential election campaign, that Rep. Paul Ryan is a deep thinker.  And, by the standards of MacGuineas, Bowles, and Simpson, maybe he is.  Their groups have given him awards for fiscal responsibility, even though they usually equate fiscal responsibility with deficit reduction, while his proposals would make deficits rise (because of huge tax cuts for the rich).  Because of the clout of the scold groups, however, it remains important for people like Ryan to be treated as serious.

The heavily-financed and media savvy scolds are thus able to create an atmosphere in which, not even two weeks after being drubbed in the election, Ryan was described in an NYT news article as a "budget philosopher."  The nonsense level is so ridiculously hyped that a philosophy lecturer who posed one of the Times's weekly "Invitation to a Dialogue" questions wrote that, at one point in American history, "what we had approximated, to put it in Representative Paul D. Ryan’s terms, was equality of opportunity, not equality of outcome."  Wow.  Ryan came up with the distinction between opportunity and outcome?  He must be really old!

As this post demonstrates, it is difficult not to mock the pose of the deficit scolds.  Still, this is anything but funny.  The article on MacGuineas, in the section that apparently is meant to pass as objective journalism, allowed a critic of the scold organizations to point out that they are not really about reducing the deficit.  They are, instead, about taking benefits away from elders, by cutting the social safety net.  The reporter, unfortunately, quotes an email from an unknown advocacy group that is critical of Fix the Debt (helpfully quoting from that advocacy group's website that they are dedicated to "researching the 1 percent," in case any readers had been planning to take them seriously), who argues that the scold groups are trying to "pad[] their bottom line."  The reporter is then able to quote a scold as angrily replying, "Nonsense.  There isn’t an agenda except to get the deal done and the problem solved."

I do not, in fact, believe that most of the wealthy people and corporations supporting the scold organizations are in it for profit, at least as a primary matter.  Still, quoting someone to that effect has the benefit of making all criticism seem illegitimate.  Why, readers are led to wonder, are so many people so unwilling to see the brilliance of bipartisan solutions like Bowles-Simpson (or Simpson-Bowles)?

Indeed, that infamous "plan" is, and always has been, an obvious sham.  Even so, as the brilliant Alex Pareene recently wrote on Salon, "Simpson-Bowles is Magic."  No one knows what it says, but everyone is sure that all of our problems would be solved if only politicians would get behind it.  Pareene's best moment comes when he points out that "reasonable old David Gergen" (a classic Fake Centrism-spouting conservative) recently "warned that Democrats are overreaching by asking for more than $1 trillion in new revenue, and invoking Simpson-Bowles yet again as an example of the Proper Way to do a Grand Bargain."  Unfortunately for Gergen, "Simpson-Bowles includes more than $2 trillion in new revenue."

So we now find ourselves with a national press that takes this nonsense seriously.  The $43 million budget for Fix the Debt is a drop in the bucket compared to the money that has been pouring into scold groups for years.  Earlier this week, the Starbucks chairman managed to expose the inanity of it all when he tried to get his employees to write pro-scold, Fake Centrist messages on coffee cups, an idea that the Gawker website lampooned hilariously, noting that Fix the Debt "advocates for lower corporate tax rates and cuts to social services but refuses to take a stand on raising taxes on the rich."

This barrage makes it possible for privileged Washington insiders like Luke Russert (son of the late Tim Russert) to spout disgusting nonsense like this: "Both parties don’t want to tell the American people it’s time to drink their tough medicine."  Because of the nonstop PR campaign that creates and nourishes Fake Centrism, this can be passed off as neutral analysis, not condescending cruelty. Do Americans really need to be told to take tough medicine, when so many cannot afford it?

Maybe things will be better in 2013.  I certainly wish the best to all readers of Dorf on Law (and others, too).

2 comments:

The Dismal Political Economist said...

One of the major problems here that no one will address and recognize is that government budgets need to mirror private sector budgets.

A business does not budget capital expenditures as a single expenditure in the year in which it happens. Instead the cost is spread out over the life of the project. And if the benefits exceed the cost then debt financing is acceptable, because the cash flow benefits from the project will service the debt.

Government doesn't budget this way, which produces huge distortions. For example, an aircraft carrier with a life of 40 years should be paid for over 40 years using debt that is then serviced by future taxpayers, you know, the ones that actually get the benefit.

So the first thing to do is to separate out the capital budget from the operating budget of government. Then the proper amount of tax revenues (to cover operating costs and debt service) and new debt (to pay for capital projects) can be determined. And spending on capital projects (investment) can increase or decrease to meet the needs of the business cycle.

This concept makes so much sense that it is indeed ignored by all parties and all sides. Of course, it is also not understood, particularly by those who say government should be run like a business. It should, but the people saying this have no idea what it means.

Nigel Declan said...

In reading this post, I am unclear whether the writer's contention is that the deficit and debt are not a problem or whether they are, but that the rhetoric being spouted about them is disingenuous or overstates the degree of the problem. Certainly many economists are of the opinion that debt is much less of a problem than some politicians and individuals with vested interests would have us believe, but at the same time, significant government debt not only requires increased future borrowing merely to maintain the status quo (as debt payments grow proportionately to the total government debt) but has historically been a significant contributing factor, if not a primary cause, of debt and currency crises across the globe. Yes, debt is less bad than many politicians suggest, but at what point does debt, as it inevitably will, catch up with a country, likely to disastrous results?