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02/24/2013

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Thomas Rekdal

The size of the current budget deficit--apart from the contribution of increases in the growth of entitlement spending--is not alarming in itself. Normal economic recovery should erase it, even if Rogoff and Reinhart are correct in believing that the recovery may take longer than most people expect.

Growth in the size of government surely must be part of the problem, because the more things government attempts to do, the more interest groups (such as AARP and the farm lobby) will organize to affect the outcome, usually in ways that benefit themselves more than others. But underlying this political dysfunction (if that is the right word) lies a deeper impasse rooted in the lack of consensus on two basic questions: How much of the nation's resources should be devoted to the old, the sick, the poor, and the unemployable; and who should pay for it--those presently alive and voting, or generations yet unborn?

These are moral questions not easily amenable to compromise. Indeed, I do not expect to see them compromised until the bond market forces some sort of accommodation. It is anyone's guess what that will look like, but it will be certain to confirm Joseph de Maistre's observation that every people gets the government it deserves.

Terry Bennett

As for the central question being posed, I agree that the effects can be absorbed relatively innocuously, unless there is a deliberate effort by government actors not to do so. This sort of thing happens all the time in private companies, even large ones. The board of directors simply says to the various division managers (analogous to federal government Cabinet members), "We are forecasting revenues to be down 3% in the coming year, so we're reducing everybody's budget 3%. Plan accordingly, and pass the word down to your reports. Cut spending on non-essential projects within your department, push for more efficiency, prioritize, drag your feet on some spending allocations, etc." This is what managers do, in the private sector. It's not particularly difficult. Every budget contains a certain amount of optimism toward the future, which can be scaled back if you find you can't afford it right now.

The 12/31 sunset of the Bush tax cuts was poised to deliver to the Democratic Party exactly what they wanted: higher taxes. I do not understand why they compromised, given their Senate majority and holding of the Presidency.

The 3/1 trigger is poised to give the Republican Party exactly what they want: lower spending. I do not see where they have any incentive to negotiate around the sequester.

Under the system our Constitution dictates, the people from the various states get to send Representatives to Congress. It seems that a majority of people in some states (to wit, the red ones) feel it is important that the federal government spend less, and they keep rewarding the Representatives who vote for lower spending by re-electing them. Until Democrats wrest a House majority and 60 votes in the Senate, this intransigent anti-spending contingent is going to keep doing what they are doing: enacting their agenda of making the federal government spend less. The President can decry their lack of intelligence, patriotism, and even sportsmanship, but the President is unpopular with the people who vote for anti-spending Congressmen, so this noise only helps them get re-elected. What seems to mystify the Democratic Party and the President is that large numbers of people in this country disagree with them, and want the federal government to spend less, and are going to keep voting for Representatives who work to accomplish that goal for them.

Neilehat

Terry, The "Red" States desire a smaller Federal Government and plan to downsize it by reducing Federal expenditures across the board and across the Nation. Fine. We'll start by eliminating all Federal Funding and Services to the "Red" States and leave them to their own devices. Now how much would that save on the Federal Budget? The "Reds" don't want to pay, the "Reds" don't want to spend, then they don't get to play.

I can hear the screams and howls rising now all across the "Red Nation". Which by the way doesn't represent the National majority - Thank God...

Terry Bennett

Neilehat - let me think about that. Some sort of opt-out plan may actually work.

Terry Bennett

Neilehat - I've been giving it the old GED try... Alas, the principle problem with citizens of red states choosing not to pay into federal programs and not avail themselves is mobility. A person can put in a career in a low-tax red state, then retire in a blue state and get the services. If it is set up at a personal level, where an individual chooses not to pay into Social Security, then wealthier people will choose not to participate and this will leave the poor to support the poor - unlikely to be viable. While there are work-arounds for these problems, ultimately it looks a lot like a dead end, and politically it's a nonstarter in any case.

I would also point out that (a) I am merely observing and not endorsing the Republican strategy, (b) an opt-out plan would seem to go against the impetus of some of your earlier posts, and (c) the blue vs. red debate in fact so particularly persists exactly because neither side has a sufficient majority, which was my original point. Recently a Democrat told me, "Once the sequester goes into effect, everyone will realize that it's the Republicans' fault for not compromising." This sentiment is oblivious to the fact that for some 40-plus percent of the electorate, "fault" is not an apt word. Those voters are enthusiastically saying, "Go ahead, sequester, and force lower spending. We will re-elect you."

As a general matter, I think the government spends money unintelligently, and I agree with the premise that it needs to be reined in. However, I would have preferred to see the cuts revised to target more obviously expendable line items. It turns out the government saves money unintelligently too.

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