StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Stan Breaks With The Deficit Hawks: A Very Personal Story

16 Dec 2009
Posted by Stan Collender

I’m having increasing trouble identifying with the religious-like fervor many deficit hawks are expressing these days.  I also don’t think the hawks are advancing the debate by their take-no-prisoners attitude that often seems to cross the line to zealotry.

I need to emphasize from the start that I’m talking about real, substantively based deficit hawks rather than those who condemn deficits only when it suits their political purposes. This definitely does not include those who only think the deficit is terrible when the other political party is in the majority. In my mind you don’t qualify as hawk if you talk about the deficit but then fail to support the spending cuts and tax increases that would actually reduce it. In case anyone is wondering, you also aren’t a deficit hawk if all you do is support largely symbolic efforts like process changes.

But I’m getting ahead of myself. Let me start from the beginning.

You can’t work on the federal budget as long as I have without being very concerned (and often sick to your stomach) about the deficit and national debt.  With the exception of the four years from fiscal 1998 to 2001, the federal budget has had a deficit every year of my adult life.  Since I was born there have only been nine years when there wasn’t a deficit.

That means there were deficits during Democratic and Republican administrations, Democratic and Republican congressional majorities, recessions and booms, slow and fast growth, asset bubbles, inflation, stable prices, peace, and war.

I don’t have children so I don’t much worry about what all this federal government borrowing means for my grandchildren.  I do worry, however, about what it means for me and my Beautiful and Talented Wife (The BTW) because we both plan to be around for quite a while.  I worry even more about what it means for my country’s future.

Because there’s no doubt in my mind about the benefit of a balanced budget when it’s economically justified, I’m more than willing to have the federal government spend less by completely not doing some things I want, or doing much less of them.  This includes entitlements. I’m also willing to pay more in taxes to get the deficit down.  And I have no problem recommending these policies.

Maybe I shouldn’t admit this publicly, but I thought the four consecutive surpluses from 1998 to 2001 and the prospect of paying off most of the national debt by the end of this decade – as both Bill Clinton and George W. Bush promised to do – was extremely exciting.  To me, the notion that we might be able to eliminate most of the government’s annual interest expense and cut spending by hundreds of billions of dollars without reducing government services was thrilling.

In other words, I consider myself, and have frequently been considered by others, to be a deficit hawk.

But my deficit hawkishness has been tempered somewhat over the years by the realization that “stuff” (I’d use another word but this is a family blog) happens that makes it impossible or incorrect to do what deficit hawks say must be done: reduce the federal deficit at all times no matter what.  Natural disasters like hurricanes and tornadoes and man-made disasters like recessions and wars don’t only occur when the government is in the appropriate fiscal condition. They have to be dealt with.

In addition, as much as some might like to believe otherwise, what the country requires and the corresponding demands on Washington change over time: the population gets older or younger and needs different things, infrastructure has to be built or repaired, the military threat grows, etc.   

And, of course, as the last two years have amply shown, there is an absolute expectation that the federal government will intervene when the economy is not performing well or if markets fail.  For a variety of reasons, that often means fiscal policy changes that increase the deficit.

It’s certainly not hard to understand the zeal and frustration of the deficit hawk community.  As the only-nine-surpluses-in-my-lifetime amply demonstrate, polite conversation, substantive discussions, and gentle persuasion don’t work that well.  And there’s definitely something romantic about thinking of yourself a fiscal Paul Revere doing the modern day equivalent of riding from town to town, that is, from cable news interview to cable news interview, telling everyone the deficit is coming, the deficit is coming (Actually, it’s already here, but you get my point).

My first problem with the hawks is that they don’t seem to realize and virtually never admit that they’re operating in a world that, except in the most unusual circumstances, seldom allows for the uninterrupted straight-line progress they want on the deficit.  The U.S. economy isn’t going to grow that consistently, and no matter how much we might want it to be otherwise, Mother Nature is going to send us some combination of hurricanes, tornadoes, mudslides, ice storms, heat waves, forest fires, floods, and droughts every year.

My other problem is that, contrary to what the hawks say, it’s not necessarily a bad thing when, in situations like this, deficit reduction stalls or is reversed. In fact, in some cases, like during a recession, deficit reduction may well be the absolute worst thing to do.

This means that progress on reducing the deficit almost always will be slower than the hawks say they want.  It also means that the slower-than-preferred progress isn’t automatically a failure and the people who don’t support deficit reductions in these situations should not be criticized for it.

From my perspective, rather than just being against everything all the time that increases the deficit, deficit hawks will have a much bigger impact and be far more effective if they do the following:

  1. Advocate aggressively and forcefully for reducing the deficit.  Pay-as-you-go rules for new proposals are important, but existing programs already in the baseline shouldn’t get a free pass.
  2. But understand that there are times, like when the economy is in the tank, that reducing the deficit or running a surplus is the wrong fiscal policy.
  3. Be the one that helps define when a deficit is appropriate.  One of the most important contributions hawks can make will be to communicate this so that it becomes the common wisdom. Their credibility will be enhanced in the process.
  4. Don’t allow the deficit to be a partisan issue.  Both political parties frequently use the deficit as an excuse whenever they oppose something but don’t want to state the real reason for the opposition. That makes the deficit into more of a political football and less of a serious issue.  Members of Congress, candidates, party officials, think tanks, etc. all need to know that they can’t claim to be a deficit reducer today when they advocated unwarranted deficit increases yesterday.
  5. Advocate as forcefully for debt reduction as deficit reduction when it makes sense economically. 

 

Holy Cow, Stan. I've seen a

Holy Cow, Stan. I've seen a lot of straw men erected in the blogosphere and elsewhere in America's political discourse, but unless you are referring to some very small subset of "real, substantively based deficit hawks" (as opposed to "those who condemn deficits only when it suits their political purposes"), you may have erected the mother of all straw men. To whom exactly are you referring when you describe these people who insist on deficit reduction/elimination at all times under any conditions? The long-time "real, substantively based deficit hawks" I know -- perhaps best exemplified by the Concord Coalition -- have made it quite clear that they have NOT been calling for deficit reduction throughout the recession and financial crisis. It seems that you are "breaking" with a group that exists only in your imagination, or at the very least is not representative of most (and the most prominent) individuals and groups/organizations focused on getting to fiscal responsibility. So to whom, please, living rather than filled with straw, are you referring?

A couple of additional notes:

Re: In case anyone is wondering, you also aren’t a deficit hawk if all you do is support largely symbolic efforts like process changes.

As I've pointed out before (probably more times than you would like), and Bruce apparently conceded (http://capitalgainsandgames.com/blog/bruce-bartlett/1288/real-fiscal-con...), any member of Congress who proposed a plan with budgetary sacrifices great enough to qualify as a fiscally responsible plan would very substantially reduce his chances at winning the next election. Political cover from processes -- most notably (1) a SAFE Commission and (2) a strong, statutory, all-inclusive PAYGO* -- are clearly needed. Otherwise at best (theoretically) some members of Congress would stick their necks out and promptly be replaced by less fiscally responsible candidates, but more likely, since they know that would be their fate, they will, absent such political cover, simply kick the can down the road, paying mere lip service to "making tough choices" to shift to a fiscally responsible course.

So you can continue to irrationally, unfairly, counterproductively and irresponsibly ridicule those members of Congress who are pushing for the SAFE Commission (e.g., Evan Bayh), but the only benefit will be your emotional satisfaction and any other personal benefits you derive from persistently doing so. I realize it can be more satisfying and perhaps rewarding in other ways to go beyond justifiable skepticism to an irrational rejection of a worthwhile opportunity (and ridicule of its supporters) based on one's war-story-borne cynicism and irritation at some types of politicians, but to it is irresponsible to allow one's self to be driven by such factors to rejecting an opportunity with a substantially positive "expected value", very high upside potential (even if optimal results are not highly likely), and negligible downside risk in terms of costs (explicit and opportunity costs), and doing so vis a vis such a great threat to our future (and vis a vis the few members of Congress who are trying to provide the necessary political cover) is a hugely irresponsible personal indulgence.

I encourage folks to read my compilation of support for the SAFE Commission (or comparable commission) expressed by prominent individuals and organizations focused on fiscal responsibility at http://brooksstuff.blogspot.com/2009/12/support-for-safe-commission-or.html

To avoid repeating here more of what I've already said, I refer anyone interested to my comments on the threads at http://capitalgainsandgames.com/blog/stan-collender/1263/whats-differenc... and http://capitalgainsandgames.com/blog/stan-collender/1312/baucus-and-budg... and my comments at http://capitalgainsandgames.com/blog/bruce-bartlett/1306/deficit-commiss... and http://capitalgainsandgames.com/blog/bruce-bartlett/1288/real-fiscal-con...

Lastly, it's kind of a funny coincidence (or perhaps not a coincidence) that you referred to "those who only think the deficit is terrible when the other political party is in the majority", because even before I got to that line I was wondering if you, Stan, are doing the opposite: attacking those who express concern about deficits because your party is in power. I do not know your political affiliation nor do I know of any self-description of yours regarding your ideology; I'm just guessing you are a Democrat and/or left-of-center ideologically. Please correct me if I'm wrong. Needless to say, there's a heck of a lot of partisan-based bias these days, and sometimes folks are unaware that it's affecting them or the degree to which it is compromising their objectivity and sense of perspective.

I hope none of the above is offensive. Hard to express it all in fully diplomatic fashion. I offer it with all due respect.


Per my asterisk after

Per my asterisk after mentioning two key process changes, I meant to add the following:

* Additional process changes (broadly speaking) would also increase the likelihood of greater fiscal responsibility sooner than otherwise:

- Clean government reform to build trust in government such that each segment (defined by special interest, demographics, whatever) has less suspicion that their sacrifices are greater than they should be because some other groups have used campaign contributions and other financial incentives to avoid their fare share of sacrifice. Shifting to a mostly publicly funded campaign system would help greatly (voluntary so that there would be no First Amendment problem, but made so attractive via high matching multiple and flexible spending limits in case of a well-financed challenger who ops out that few, if any, see any advantage to opting out). The The Fair Elections Now Act (S. 752 and H.R. 1826) would be a move in the right direction. (belief that public’s sacrifices will not be wasted or used to protect or benefit special interests. Another useful clean government reforms would be greater restrictions on the "revolving door" for members of Congress, their key staff and key agency officials.

- Shifting entitlements off auto-pilot in the budgetary process, and having them addressed in each budget as we do discretionary spending, with budgets set each year.

- Simplifying the tax code and re-categorizing tax expenditures as spending.


Info on The Fair Elections

Info on The Fair Elections Now Act (S. 752 and H.R. 1826) http://www.publicampaign.org/node/38166


Incidentally, apropos of

Incidentally, apropos of Bruce's comment at http://economistmom.com/2009/12/what-makes-deficit-reduction-undemocrati... (although I don't know if Bruce was being serious or facetious), Cato's Dan Mitchell inadvertently makes a strong case for the SAFE Commission while trying to do the opposite (and no doubt accomplishing his objective with his audience on the far right) at http://www.cato-at-liberty.org/2009/12/10/deficit-commission-wrong-targe...

If it weren't so unfortunate and potentially consequential, it would be hilarious that delusional, liberal hyperpartisans are sounding the alarm that a SAFE Commission would be nothing short of a sneaky mechanism leading to the dismantling of entitlements while delusional, conservative/libertarian hyperpartisans such as Mitchell are doing the same with regard to tax increases.


Also, from the Financial

Also, from the Financial Times, 10/10/09:

"The regular legislative process is simply not going to get the job done," said Mr Conrad, chairman of the Senate budget committee. Mr Gregg, ranking Republican on the committee, said "a bipartisan fast-track process is the best way to arrive at workable solutions".

In a sign that the concept of such a commission is gaining ground politically, anti-tax activists immediately attacked the proposal, saying it would lead to tax increases.

Grover Norquist, head of Americans for Tax Reform, published an open letter saying the "commission is unacceptable from a taxpayer perspective" because "it would lead to a guaranteed tax increase".

The plan drew immediate support from a broad group of budget experts, including the bipartisan Committee for a Responsible Federal Budget, which said that "any process that helps politicians overcome partisan gridlock should be applauded".

However, Chris Edwards, director of tax policy at the small-government Cato Institute, said a commission was likely to put too much emphasis on tax increases when "long-term projections reveal a spending catastrophe, not a revenue challenge". http://www.ft.com/cms/s/0/4d349078-e52d-11de-9a25-00144feab49a.html


The Financial Times Article, Grover & Cato

Brooks,

As you so noted by posting The Financial Times's piece, Mr. Norquist and Cato (a group one associates more with the John Birchers backing the 2010 Conservative Political Action Conference than the Green Hornet of comic strip fame) both sharply attacked the very concept of such a bipartisan commission.

Makes sense, really. Were such a commission to be appointed in the manner of the U.S. Supreme Court and not elected with ample influence from significant amounts of special interest money, Mr. Norquist and Cato would have little ability to influence its actions. Sans a financial club with which to threaten the members of such a commission, Laura Ingraham would need to repeat her "first they came for the rich/and I did not speak out because I was rich" poem. Or Steve Lonegen, senior policy director at the Americans for Prosperity, would again need to tell Americans that "we cannot allow the pen to be mightier than the sword."

No, sadly, this writer did not contrive Ms. Ingraham's or Mr. Lonegen's comments. Both can be accessed quite easily via a simple search of the Internet.

One hardly wishes to "irrationally, unfairly, counterproductively and irresponsibly ridicule" those in the Straw Men Erected Department of the blogosphere. The practice is too easy and produces only limited chuckles. Besides, it's the most basic of canards and a tactic one learns as a freshman in the debate club at the average U.S. high school.

It's just not hard to note the "religious-like fervor," "take-no-prisoners attitudes," and "zealotry" of Mr. Norquist, Cato, Ms. Ingraham, or Mr. Lonegen about their apparent disdain and willful ignorance of actual governance and the decisions and compromises so required in a democratic society.

Stan Collender has made a number of well-reasoned, logical, bi-partisan, and, yes, non-partisan comments in his post. I agree with much of what Mr. Collender has written. Government on all levels should in times of economic prosperity (strong employment, bullish market) limit spending while continuing to tax at the same rate. Annual budget deficits should be eliminated altogether and with prudence. Excess revenues must (not should, must) be applied to reduce any long-term debt. Call it "saving for a rainy day," if you will. Call it common sense. Please do not call it a need for immediate tax cuts and "returning the money to the people." We've been there. We've done that. We're here now. We know it just doesn't work. Not for most of the people and certainly not for the long-term economic stability of the nation.

Conversely, during times of severe economic strife, and in my 42 years and change, I, an employed U.S. resident with a low five-figure savings on a low five-figure salary, realize and accept that national leaders must run a deficit and, yes, even a deficit as large as this one. Government, which as I once read is not a "them" or some sort of enemy but an entity "of, by, and for the people", must pour massive amounts of capital into the system. National leaders must use federal funds to protect as much of the economic and employment systems as possible all the while knowing that such macro-level prevention of further erosion will never be recognized or appreciated by most for the simple fact that human beings, as a species, rarely express thanks for the job, business, or bank that they almost lost.

Were it up to me, debts and deficits would not be allowed in national government in any form or fashion. Debts or deficits would also not exist in the private sector. Either you pay for it or you wait until you have worked to obtain the necessary capital to do so. Of course, I would also favor peace on earth, goodwill toward men, and the hitter always choking up on the bat and shortening his swing with two strikes so as to put the ball in play and avoid the worthless fanning of the air and the words "Strike three!!!!!"

Now, Brooks, I don't know your politics. Perhaps you're a libertarian. Or just a Conservative. It's been my experience that Cons tend to make plenty of visits to the Straw Men Erected Department of the blogosphere before and during their Internet posts.

Full disclosure: The writer on this end of the keyboard has been an Independent since 1987. Before being an Independent sent a thrill up Charlie Cook's leg. Or perhaps political Independents with 22-year track records like myself sent starbursts through Cook's screen and made him sit up a bit straighter on the couch, wondering if I'd just winked at Chuck? I never can keep these things straight.

Either way, Mr. Collender made a number of decent, well-reasoned, rather apolitical points with his post. Drew my rather cynical attention, which isn't easy. I suggest that you give it a bit more consideration. Or not. Hey, it's a free county.

Merry Christmas, Happy New Year, and all that jazz to you and yours.


I enjoyed reading your

I enjoyed reading your comment (the style and humor), but I'm at a loss for what your argument is and what you think my arguments are, and it seems that you're mistaken on the latter, including perhaps misinterpreting my point about Norquist and Cato -- my point was that we should see their opposition to a commission on the basis that it will lead to higher taxes as a reason we should support creation of such a commission, just as is opposition from the extreme left on the basis that a commission will lead to cuts in projected entitlement spending. We need both (and probably cuts in projected discretionary spending as well). That's not the only point of mine that you seem to be getting completely wrong, but it's one of them. It would help if you would clarify what you think I'm saying and why you disagree.

You also seem to be misunderstanding what Stan is saying. He wasn't attributing "religious-like fervor" to irrational, irresponsible ideologues and hyperpartisans of the right like Norquist. Rather, he was falsely attributing it to the individuals and groups pushing for a plan and for eventual (post-recession) action to move us to a fiscally responsible course, falsely attributing to them advocacy of deficit-reduction at all times under any circumstances (thus precluding fiscal stimulus amid recession). If he was speaking of groups like The Concord Coalition and the Committee for a Responsible Federal Budget (I won't flatter myself by thinking I was among those in his thoughts), he was simply, absolutely wrong. I've asked him to let us in on to whom he was referring, but he hasn't, perhaps because he knows he's wrong. And the positions he says a good "fiscal hawk" should take are the ones those folks (and I) already take and have all along. So if you think Stan has made "a number of decent, well-reasoned" points (other than to state positions on which those he's sharply criticizing already agree, notwithstanding his gross mischaracterization), please clarify.

Miscellaneous:
I saw a clip of Ingraham saying that -- saw it on The Daily Show the other evening, and I both cringed and laughed at the same time, knowing that she was outrageously paraphrasing a poem referring to the Holocaust. Real classy, Laura. As for Lonegan, while his line was not as offensive, it showed about as much intellectual depth as the typical "tea bagger", combined with the same disturbing confidence in one's non-existent insight of...well, the typical tea bagger. (I don't know anything about Lonegan so I don't know if he's a tea bagger or just a partisan idiot.)

Re:Now, Brooks, I don't know your politics. Perhaps you're a libertarian. Or just a Conservative. It's been my experience that Cons tend to make plenty of visits to the Straw Men Erected Department of the blogosphere before and during their Internet posts.

You're right -- you don't know my politics, yet you seem, without any basis, to limit the possibilities to libertarian or conservative. As for plenty of conservatives erecting plenty of straw men in the blogosphere, of course they do, as do plenty of liberals and for that matter plenty of libertarians and folks of other stripes. In fact, unfortunately, it seems to be more the norm than the exception in the blogosphere (not to mention most of political talk radio and Fox News and MSNBC). Good-faith, substantive, logical discussion/debate is hard to find in the blogosphere. I guess hyperpartisanship is more fun.


Deficit hawk

What I would like to see is countercyclical policy that reduces the deficit under a good economy and uses deficit spending to reduce unemployment during the tough times. Not only does this keep the amount of interest transferred to the wealthy at a minimum, BUT it has the added advantage of increasing government purchasing power.

During bad economies when unemployment is high, government spending that puts people to work gets more bang to the buck. The cost of hiring a worker that is currently unemployed is the salary benefits and on the job training MINUS the unemployment benefits that are currently paid by the government. So by adding a little more money, we get value for what we spend. During boom times, the government competes with the private sector for workers so cut backs in projects can be taken then. Using boom times to plan projects for the bust would greatly smooth the business cycle as well as keep the debt at a reasonable level.


I'll confine myself to noting

I'll confine myself to noting that anyone who voted for the government to assume new, elective obligations such as the prescription drug benefit and the Iraq War, slash taxes at the same time, and all during the expansion phase of a business cycle, makes a plainly laughable spokesperson for fiscal restraint now. Sadly, nearly everyone in the U.S. Congress expressing concern about deficits now voted for all of those programs then.


Please read the history

"That means there were deficits during Democratic and Republican administrations, Democratic and Republican congressional majorities, recessions and booms, slow and fast growth, asset bubbles, inflation, stable prices, peace, and war."

Please pay attention to the history. The deficit was quite deliberately blown up by the Republicans under the Reagan administration, then shrunk by Bush I and Clinton. It was then quite deliberately blown up again by Bush II. It's been increased by Obama, but for d*mn good reasons. Massive peacetime deficts are not an ongoing feature of nature; they are a feature of one party's deliberate strategy.

And don't give me any sh*t about 'only Congress can spend money; if that was true one would not have seen the history that we've seen'.


Thanks for that link. I'm

Thanks for that link. I'm still waiting for Stan to tell us to whom he is referring, but I won't hold my breath. As I said upthread, the most prominent non-partisan folks with a long-time focus on shifting to fiscal responsibility simply haven't taken the positions Stan attributes to them and have taken the positions he says they should take. That's why I said he seems to have erected "the mother of all straw men".




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