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Deficit politics

To say another word on the question of deficits, one of the important characteristics of the spending issue is that it's not conceptually difficult to solve in the way that, say, developing new energy technologies is. It's just politically difficult to solve. But most experts have a general sense of what should be done: short-term increases in deficits during a recession paired with long-term reforms to bring the government's spending projections down to more sustainable levels.

The problem is that in a political system that doesn't trust itself, long-term commitments are virtually impossible. The Obama administration, for instance, would say it made serious long-term commitments in the Affordable Care Act: the excise tax and the Independent Payment Advisory Board, to name just two. And it's not wrong about that: As written, both policies will save extremely large amounts of money over the next 20 or 30 or 40 years. Huge amounts of money. But conservatives don't believe those policies will really be put into place. And in campaigning to repeal them, they've made it somewhat more likely that those policies won't go into effect.

But it's hard to see our way out of this dynamic. Our deficit problem, most would agree, is a long-term deficit problem. The only way to address it is to pass laws that change our spending over time. Which is what the Affordable Care Act did. It's what a responsible conservative administration would do if they were in power. But the other side will always attempt to undermine the perception that progress is being made on our fiscal problems.

As economists like to point out, public concern with the deficit is driven by elites. The public wouldn't be more or less concerned if we added or took away a zero from the national debt. But they'd probably be less concerned if Mitch McConnell and John Boehner and Sarah Palin held a press conference to say Democrats had passed some important and painful policies to help assure our fiscal future. But of course, Mitch McConnell and John Boehner and Sarah Palin can't hold that press conference even if they wanted to, as it would destroy their chances in the next election.

By Ezra Klein  |  June 11, 2010; 10:29 AM ET
Categories:  Budget  
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Comments

". But conservatives don't believe those policies will really be put into place."

Ezra, we are in the second cycle of Republicans running up the deficit and then turning on a dime and denouncing it when a Democratic president takes over, all the while blocking any measures to reduce the deficit.

I don't know about you, but I figured it out after getting burned once.

Posted by: BarrytheD | June 11, 2010 10:39 AM | Report abuse

"The public wouldn't be more or less concerned if we added or took away a zero from the national debt"


Are you saying we should keep the public in the dark about the deficits?

In 10 years if we're in the dark and we're paying $800 billion just to service our debt should we not be asking "Why didn't anyone tell us this?"

Would you take the same tact of "the public doesn't need to know" when it came to the horrible mismanagement at the MMA? I'd hope not.

Posted by: visionbrkr | June 11, 2010 10:56 AM | Report abuse

Ezra, just wanted to point out that you talked about fixing the deficit purely in terms of adjusting spending. And the real political problem in fixing the deficit seems to me that it has become nearly impossible to adjust (i.e. raise) revenue.

Posted by: jasonsugg | June 11, 2010 10:58 AM | Report abuse

There's a bit of a chicken and egg problem here. Is the inability to make compromises for long term fiscal responsibility the result of a collective action problem among the elites, the result of pressure from primary voters who might choose a less centrist alternative, or the result of pressure from general election voters who might credit the successful compromise to the other party? The answer probably involves a feedback loop between all of these factors. But at some point leaders from both parties have to take the political risk and work together. The voter response might just be different than they think it will be.

Posted by: jduptonma | June 11, 2010 11:02 AM | Report abuse

where is the evidence that we have a functioning republic?

Posted by: VMzJxah | June 11, 2010 11:08 AM | Report abuse

"But of course, Mitch McConnell and John Boehner and Sarah Palin can't hold that press conference even if they wanted to, as it would destroy their chances in the next election."

Is it that? I think you are missing the whole point of Democracy. The job of opposition is not necessarily stick to Truth, but to bring the political opposition so as the other side of the policy is high lighted. That is crucial and such timely focus is really helpful.

I do not fault GOP for not praising Dems for HCR. I value their service in high lighting precisely sleepary slopes on which we are.

As long as this GOP does not 'twist' political arguments which undermine 'fabric of the nation or security of the nation'; other policy criticism is kosher.

Implicit or perceived Racism in Tea Party criticism and their incitement of that along with violent means - that is crossing the line. That is no, no.

Beyond all this, Ezra time is fast approaching where Obama & Dems will HAVE to open the policy issue of costly path of Medical Entitlements since that is the real spending issue here. Let non-sense GOP argue about 'pulling the plug of Grand Ma'; political responses for that must be found.

The political significance of European Mess is the 'entitlement expansion' project has a limit. VAT lubricated welfare state eventually exceeds it's borrowing (the same way businesses over supply in classical supply side Economics) and we get the problem.

All that has to be squarely faced now. You know, the real issue in Democracy is if true leaders 'waste an election'. Obama must use Nov 2010 election to seek a mandate for these cost cuttings (or alternatively use it to seek mandate for Energy policy; but damn it, don't muddle through these elections).

Seek the political purchase of cost cuts via these elections and then use the vehicle of Deficit Commission to set those measures in motion.

Posted by: umesh409 | June 11, 2010 11:09 AM | Report abuse

The PPACA does not reduce spending at all; rather, it increases spending and shifts the burden from a taxpayer-funded federal government to taxpayer-funded state governments and to individuals.

States like Vermont (of all places), Pennsylvania, Iowa, Illinois, and Florida have copious amounts of data they're willing to share, if anyone is willing to take a look.

It's also interesting that the "Patient Protection" prefix -- the "PP" part -- of the PPACA has already been dropped from the Social-Democratic Party vernacular. That's a sign of what's to come.

Posted by: rmgregory | June 11, 2010 11:26 AM | Report abuse

It's just so hard to take you seriously on this when you keep talking about the ACA as something that will put us on a sustainable budget path. Doug Elmendorf disagrees with you, as he said a few days ago. He knows that his CBO estimates are completely unrealistic because he is scoring what they tell him to, not what will really happen.

Hell, half of the supposed deficit reduction is $70B in premiums from the CLASS Act, but those premiums are not free money, they create a liability for future benefit payments. The idea of using cash accounting for something like that (i.e. you get premiums right away but are unlikely to pay any benefits for a number of years, so rather than set aside that money for future claims, like every actual long-term care insurance plan would be required to do, they just spend the money on something else) is unfathomably ridiculous. If my company were to launch a new long-term care product and take all the early premiums straight to the bottom line the regulators would drop the hammer on us, that is after they stopped laughing that we'd even try something so ludicrous.

And let's not even get into that fact that the insurance under the CLASS Act is so poorly designed that both CMS actuary Richard Foster and the American Academy of Actuaries expect it to be insolvent in just a handful of years. Not only are they spending all the premiums to pay for health reform, the premiums aren't even sufficient in the first place. This is fraud of the highest order. I can't believe how little play it has gotten in the press, I would guess because most people don't even know about it, nor do they know about reserving requirements or how a long-term insurance product works.

Posted by: ab_13 | June 11, 2010 11:49 AM | Report abuse

@Umesh: The job of opposition is not necessarily stick to Truth, but to bring the political opposition so as the other side of the policy is high lighted. That is crucial and such timely focus is really helpful.

Its clear that boner is going with the "not necessarily sticking with the truth" part in his every utterance. It is the the job of politicians to not purposely mislead the voters by demagoguing virtually every policy proposal the opposition makes.

Posted by: srw3 | June 11, 2010 12:44 PM | Report abuse

Wouldn't it be nice to live in a world where acknowledging that your opponent did a good thing didn't count as a strike against you?

Posted by: stand | June 11, 2010 12:55 PM | Report abuse

Ezra, is it not reasonable to assume that a President who bases his "deficit reduction" on future spending cuts, while spending record amounts in the present, is not serious? Current politicians can't bind future hands with a mere promise. Has that EVER happened in the history of Washington? Actually, it shows that only cuts instituted in the present have a chance of surviving long enough to do any good.

As for those who reflexively blame Republicans - for everything - I say: Average deficit under Republican House control (FY1953-54 & FY1995-2006) in constant 2000 dollars was $82.3 billion. Same average under Democratic House control (FY1955-1994, FY2007-09) was $159.3 billion, or 94% higher. A Democratic President in conjuction with a Democratic Congress hasn't produced one single balanced budget in the 60 years (0 for 26) since Harry Truman did it during the post-WWII demobilization.

Only divided government, it seems, results in deficit control. The pork addicts all go "hog-wild" without a counterbalance. Neither party is clean, but for Dems to try to act as if they are fiscally responsible is dishonesty of biblical proportions.

Posted by: INTJ | June 11, 2010 4:18 PM | Report abuse

Ezra's conclusion seems wrong to me. Surely a functioning democracy does not require that the two sides praise each other's good ideas. Opposition parties *should* spend their time pointing out any problems, however minor or hypothetical, in the governing party's plans while possibly being completely silent about their good aspects, or at least down playing any
good aspects.

Perhaps the issue here is that the opposition party is not just criticizing, or even stretching the truth somewhat about, the governing party's plans, but just making things up out of whole cloth. There are claims such as: the "doc fix" problem is due to Health Care Reform, any cost reduction measure in HCR will be repealed, any tax increase will destroy America. In short, Democracy depends on some sort of objective truth, and one party has gone "postmodern". Moreover, the Republicans have approached economic policy that way since they started selling the 2001 Bush tax cuts---we need them because we have big surpluses; because we have a recession; because they'll increase government revenue; because double taxation is unfair; and on and on and on.

Since the Republicans' conclusion is always the same, no matter how the circumstances change, then the reasoning connecting circumstances to conclusion has to be suspect.

Posted by: adonsig | June 11, 2010 4:48 PM | Report abuse

Then why are long term commitments to spend our money not a problem?

Posted by: rteske | June 11, 2010 5:07 PM | Report abuse

How about a short term commitment...
Let's say stop stealing the American taxpayers money to pay off your friends in Government and the Unions for... Say 18 months!

Shocking I know... But what the heck

Posted by: DrMysterious | June 11, 2010 10:15 PM | Report abuse

"But of course, Mitch McConnell and John Boehner and Sarah Palin can't hold that press conference even if they wanted to, as it would destroy their chances in the next election."

Sure they could. It'd just require that they love their country enough to be honest, instead of cravenly grasping for any edge that might advance their careers.

Posted by: adamiani | June 11, 2010 10:29 PM | Report abuse

I go back to March 2009, when President Obama, in a speech before Democrats in Virginia, derided the Republicans as the party that caused the problem (in spite of the fact they hadn't been in power in COngress for 2 years) and telling them to get out of the way. "What do they think stimulus is anyway." was the phrase he used.

So, given then dynamic, where does trust come in? We have big problems and a lack of leadership. The President could have called on the Republicans to join him in bi-partisan action to come up with a stimulus that would work. Instead, we have what those people in the corner, who always say, "If I were running the country......" put into place. All those public sector jobs that remove money from the economy, isn't the way to stimulate.

In the Gulf oil spill, this president has the same mentality. Not once have I seen him say to BP, "What can we do to help?" It's pretty obvious they're not letting this crisis go to waste, politically, they're just allowing our shoreline and fisheries go to waste, while they play politics.

So, is this how you gain trust? I don't think so.

Posted by: bflat879 | June 12, 2010 9:40 AM | Report abuse

Ezra,

Your attempt to mislead readers borders on criminal! You will be personally responsible for what will someday be Greece-like riots in the street and a hyper-inflation induced downward-spiral of US living standards for our children and grand-children…a generational crime against humanity!

For 18 months Democrats have controlled the government. In this rare instance where something could have been done to bring spending into line, we have seen no effort to reduce long term obligations, only a mushroom cloud of new structural spending. CBO continues to report that health reform will INCREASE spending, to say otherwise willfully misleads the American people!

The ONLY solution to our situation to outlaw ALL defined benefit plans and replace these obligation as pay-as-you-go, defined contribution plans. The ENTIRE Democratic platform is built from a strategy of trading votes for the UNAFORDABLE promises of “free” health care and retirement benefits.

Posted by: ELFopportunity | June 12, 2010 10:40 AM | Report abuse

The national debt is now at $13T (that's trillion) and on track to reach $20T by the end of Obama's 2nd term. And basically the ONLY defense I hear any more from Leftists is that Bush (or Reps) did it too!! So there!!

This is an absurd defense; it's like saying that a boy who plays with matches is comparable to a boy who burns down the garage. Yeah, the Reps were shameless spenders...but their minor league rookies compared with Obama & Co. Obama didn't create the fiscal debacle that is Medicare, but he certainly made it exponentially worse with his utterly unaffordable expansion of the welfare state.

Posted by: JohnR22 | June 12, 2010 10:48 AM | Report abuse

If/When people care enough about the deficit, they'll raise taxes. Then you don't have to wait 10 years for a commitment to take effect. You start saving immediately and continue saving until the supreme court fiats an idiot into the office of the president.

Posted by: zosima | June 12, 2010 3:28 PM | Report abuse

To say that the excise tax saves money is a twisted lie, like me saying I am saving money by getting a new job. Saving money means cutting expenses, not raising revenue.

The payment board has a chance of saving money, with the caveats you mention..

But, increasing demand for healthcare, paying for people's care with tax dollars, and forcing overpriced unproven medicine to be covered is going to blow prices through the roof, just like in Massachusetts.

Posted by: staticvars | June 12, 2010 9:18 PM | Report abuse

Garbage. This is usual Ezra Klein 'progressive' doubletalk.

obama chose to lie about obamacare; It will NOT save any money - it will only drastically increase costs, and the average american can clearly see through progressive lies. For instance, medicare being robbed... of $445B; for instance, 10 years taxes & fees to cover 6 years expenses... and this being called 'balanced'.

People don't believe obamacare because obama, pelosi, reid LIED. And people won't believe any of these 'progressive' liars until they start telling the TRUTH.

Posted by: wilsan | June 12, 2010 10:57 PM | Report abuse

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