Bankrupt Debt Ceiling Negotiations
Posted on Jun 22 2011 at 03:26:26 AM in Liberal
Senator Kent Conrad, a Democrat, is now Closed-door negotiations conducted by Vice President Biden aren't the right forum for these changes, and Conrad's statements seem to be an admission that Americans have been sold a range of unworkable solutions.
Open discussion is badly needed here: it would force politicians to lay actual proposals on the table. Unlike the Ryan Budget, these proposals would have to be implementable, not pipe dreams. But so far, Democrats have resisted any public talk of cutting spending, and Republicans have offered fantasy-land ideas that only spending is to blame (while consistently failing to mention which programs are evil). I think this is because any articulable solution would be either unpopular inside the Beltway or unpopular with the electorate. Simple evidence of this is the NYT article linked above, where we get only the vaguest summary: "hard choices" are being made and there is a "general consensus that federal workers are going to have to contribute more to their pensions, though the details are still to be determined." As the article notes, these won't save $2 trillion over 10 years. The real savings come from "excruciating choices about federal health care and safety-net programs, as well as the tax structure." As is the case in a functioning democracy, the politicians make secret decisions about things like health care and then inform the electorate.
Evidence of rampant bad information is found in polls: 73% of Americans think the deficit is caused by spending problems, yet about 65% are also worried that Congress will cut Medicare, Social Security and welfare programs too much. There's also fear of sparing the rich: 64% worry that Congress will "protect the rich at the expense of everyone else." This points to two things: either people don't understand the reasons for the budget, or they think that Congress will balance it on the backs of the middle class. Plenty of both is probably true-- but I favor the former considering that the only program people favored cutting by a majority was foreign aid, which is less than 1% of spending. Cuts to the military (42%), welfare programs (39%), Medicare (38%), and Social Security (34%) weren't very popular.
To bring it back to Senator Conrad, he's basically advocating making potentially very unpopular changes with no public input. By his lights, this needs to happen (in installments if necessary). Conrad is advocating a six month extension if certain goals aren't met, and other leaders like Senator McConnell agree. Even in cold economic terms, this is the wrong path to fixing the deficit: it would be terrible for short term stability of already-fragile credit markets. This could lead to dampened growth over the medium-term, making budget problems a whole lot worse. And once shaken, credit-market faith doesn't return easily. Imagine if the U.S. runs this obstacle course in another six months-- it would work counter to the market stability Senator Conrad is laboring to produce.
Closed-door negotiations also make it more likely that the cuts will be done the wrong way. The obvious objection is that sufficient democratic checks aren't present and policies are likely to favor those that politicians favor. But a somewhat more subtle problem arises when considering the long term effects of policies: there tend to be a lot of unintended consequences when changing big programs. Without serious economic analysis and fair decision making, we could end up with a set of policies that work against worthwhile goals. Imagine revoking Medicaid from a single mother with a few kids so she has to go to the emergency room every time one of her children gets sick. What if one child has a chronic condition that requires regular doctor's visits? Now imagine dumping tens of thousands of these patients on emergency rooms across the country. The health care cost explosion would get worse.
More than any other issue in recent memory, the craziness of debt-limit brinkmanship reminds me how broken the political process has become. There are some issues that you could argue are best decided in secret. These aren't those issues. In some fundamental sense, the what-to-cut conversation is about how we weight the military against programs that deliver health care and retirement benefits to Americans. It's also about what promises we're willing to make to the poor and future retirees, and about what a fair divide between public and private looks like. If there's anything that fits the definition of a conversation we all need to be a part of, this is it.