About Peter Radford

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The Federal Deficit Increases … What a Surprise!

The White House has reported that the Federal Deficit is climbing once more rather than declining as it did last year. The New York Times reports the story here: Deficit Will Climb in 2006, White House Says.

There is absolutely no news in this. The Repuiblican Party’s efforts to roll back entitlement programs demands that they pursue reckless fiscal policies becasue they know that they cannot get electoral approval for their aganda. Americans are hooked on public programs like Social Security and don’t want them to be abolished. So the Republican strategy is to undermine them by claiming that cuts ‘have to be made because of our fiscal crisis’. Of course they omit to mention that they created the crisis in the first place.

In the meantime, the White House blames Katrina expenses for what the call a temorary increase in the deficit. This is nonsense. The problem is the deliberate reduction in revenues via those infamous tax cuts. Federal revenues are at levels we haven’t seen since the early 1950’s. This is despite the so-called war on terrorism which needs funding [although the Pentagon budget is remarkably unchanged in its priorities from before 2001, so the war on terror has apparently had no imapct on the way in which money is spent]. So we are borrowing to pay for the so-called war, which is why I refer to it as ‘so-called’. Real wars cost real dollars and are paid for by the tax payers. Since no one seems to be willing to pay for this one I assume no one thinks that it’s very important. Even more to the point: amidst all this red ink Congress still talks blithely about cutting taxes even more! Blatant hypocrisy like this is shocking. But then the Republicans have been extraordinarily successful in lying about their intentions without being called to task.

That’s why there’s no news in this release. Until the financial markets punish America for being a banana republic, which looks unlikely at the moment, we cannot expect a sound economic policy to emerge from Washington. It will happen sooner or later, and the longer the delay the worse the implications of the punishment will be.

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Corruption

While we are on the subject, Transparency International is a non-profit based in Berlin that keeps tabs on worldwide corruption and its effect on society. You can find them here: Transparency International.

Their 2005 Corruption report ranks the U.S. at number 17. I wonder whether the current outbreak of scandals in Washington will push us further down the rankings. Then again I notice that 16th to 18th is a pretty consistent place for us. Maybe that’s the best we can hope for until our system is fixed so that cheating isn’t such a temptation for our elected representatives.

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Abramoff and DeLay

I have not commented on the Abramoff scandal because of the wealth of good commentary available elsewhere, like here: Talking Points Memo. But now, with DeLay throwing in the towel at last, seems like the time to say something.

Let’s keep this very simple: the American system of government is riven through with corruption.

First is the inordinate amount of money that flows through the political system. It is astonishing that Americans tolerate an electoral system where the person with the most money has a vastly enhanced chance of getting elected. It is virtually impossible to get elected to the Senate without being a millionaire. Is that really democratic? Wherever there are rivers of cash there are opportunists like Abramoff lurking to influence ambitious people like DeLay.

Second is the ability of individual members of Congress to append spending on pet projects to any piece of legislation. They can slip these ‘earmarked funds’ anywhere with the result that billions of dollars are spent annually on projects that have had no scrutiny and are entirely personal to the legislator. Since everyone does it there is no incentive to exert control — the ethics committee is entirely silent on the subject — and most often these earmarks become paybacks for lobbyist support. These earmarks may be small individually, but they add up to a large network of payoffs and wasted public money.

Third, the legislative process itself militates against oversight. For instance this year’s budget proposal, which ran to over 700 pages was presented to members of the House the same day that they were supposed to vote on it. I doubt whether anyone knew what they were voting for, yet it is the foundation of how we spend hundreds of billions of dollars. This broken process explains the odd loopholes and special interest favors that litter practically any legislation: it is an open invitation to corruption since members who are well connected can slip in clauses buried way at the back of a bill without having to worry that a debate will ever reveal, let alone scrutinize, them.

The reaction to the Abramoff scandal will show us whether Congress understands the damage that practices like these do to democracy. Right now I am skeptical because the reaction has been more a case of handing over Abramoff’s cash — Hastert has given his $69,000 to charity! — than fixing the operating rules that gave him his ability to wield influence in the first place.

It’s vital that Congress cleanses itself: we need it to exert itself as a counterweight to the secrecy and subterfuge of the executive branch. I would like to think it had moral authority when it did so.

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Thomas Friedman and Budget Priorities

A couple of days ago Thomas Friedman wrote one of his typical pieces for the New York Times [NYT January 4th.]. The thrust of his argument was that external threats to American power were less significant than internal threats such as the soaring cost of entitlement programs especially those for health care. He also mentioned a recent book by Johns Hopkins Professor Michael Mandelbaum that suggests American governance of the world is healthy and, as a result, America needs to exert more power not less. He tied the two strands of thought together by highlighting the dilemma America faces and the downside for the world of a poor choice. I think the issues are deeper than he portrays and that Friedman isn’t helping us get clarity.

I think the problem is that America is facing real competition for the first time and it doesn’t like the threat. His argument, which he doesn’t make clearly, is that we will be have to make choices in the future because the competition will force us to. We have a set of budget priorities that are untenable in a globalized economy so we will have to choose between keeping taxes low or raising them, and between entitlement programs and other stuff like defense. The problem is that we thought we could have it all and that the gravy train would never end. Whoops!

Right now we are trying to have it both ways: we want to keep our programs and we want to be the world’s enforcer. In the face of competition we will have to recognize that we can’t do both. That’s a novelty for a country pumped up by its relatively recent ‘conquest’ of the Soviet Union and the attainment of sole super power status. So which is it: cut back our world role and let the Chinese take over as the super power? Or slash back our social programs? My money is that America will do a Europe and go for the former. Maybe we’ll be suffering from French disease — whatever that is — in another 50 years or so.

It didn’t have to be that way of course: we could have kept a tight budget and financed our social programs properly. We could have protected the Social Security trust fund. We could have opted to keep defense spending focused on defense and not offense. We could have developed a more efficient health care program.

That would have meant higher taxes all along, and a recognition that American power was limited. It would have meant cooperating with partners rather than bossing the world around. It would have meant admitting that free wheeling all American capitalism doesn’t always produce the best social results. It would all have sounded so “Old European”. The real American hubris is that the electorate really thought it could have it both ways and it hates to learn that it can’t. So we get angry and lash out at people like Friedman who annoy us because when they try to tell us that.

BTW: the aspect of his column that no one else seems to have commented on in the blogosphere, but really must annoy our foreign friends is the astonishing assumption that he makes regarding world governance. He seems to think the world likes having America act as enforcer [he uses the word ‘governor’ because it sounds more pleasant]. I doubt that they do. It must get a little tiring having all the world’s big decisions being made in Washington where no one outside of America has a vote. That looks and quacks a lot like an empire to me.

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AEI – Short Publications

So I’m back from the holidays: Happy New Year to you all.

For starters here is a piece at the American Enterprise Institute [a right wing think tank] by Greg Mankiw, Bush’s former economic advisor: AEI – Short Publications. My reaction is mixed, although he touches on a few things I have advocated myself, such as the introduction of free markets into agriculture. Where I I have a bone to pick is on the taxes/benefits argument he makes, and on his gratuitous comments about there being some ‘good taxes’.

For instance I don’t recall him arguing, publicly, for a gasoline tax which would be far and away the best way to wean the country off gas usage. Saying something like that when you’re off the team strikes me as a bit lame!

As for the ‘vastly higher taxes’ comment: he completely ignores his own role in abetting the recklesss fiscal policy of this administration. The choice is not just between taxes and cutting benefits. It is between revenues and expenses in total including things like defense. We have not had a clear debate about all the options because people like Mankiw try hard to keep the focus on the simple tax/benefit balance, while ignoring other sources of funding such as cutting the rampant waste at the Pentagon [which should surely anger anyone like Mankiw who seems to stress efficiency].

Finally Mankiw, like all right wingers, refuses to take a full view of the provision of health care. He only frames it in the context of the piece currently paid for by the government [which he keeps arguing needs to be reduced in oreder to avoid those draconian taxes]. He completely ignores that part of the economy which is now privatized and which is horrendously inefficient: the value being provided by the mish mash of bureacracies like the insurance companies could most likely be more cheaply provided by the government thus releasing money into private hands for other things. We, on the left, need to keep pressing the Mankiws of the world to include their precious private sector in the wider social benefits/cost discussion so we can reach a complete rather than partial solution.

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