Deficits

Why they are, and will continue to be, a bipartisan indulgence.  

Motivation. In the current political divide, neither side feels much motivation to avoid deficits. Or perhaps it would be more accurate to say that both sides feel motivated to adopt policies that are almost certain to lead to deficits.

Democrats believe in expanding government. (All right, in fairness, some moderate Democrats could perhaps be better said to not believe in significantly shrinking government. None appear to believe our government is grossly ovesized.) This tends to produce more spending than revenues, hence a deficit.

Republicans believe in shrinking government. (All right, in fairness, some moderate Republicans could perhaps be better said to not believe in significantly expanding government. None appear to believe our government is grossly undersized.) The presently favored policy for doing this is to “starve the beast” by reducing revenues. This tends to produce more spending than revenues, hence a deficit.

Ignorance. The Democrats stubbornly and stupidly insist on disbelieving in the extreme value theorem, in the fiscal variant promulgated by Laffer. They appear to believe that the only practical limit on revenues is political will to raise the tax rate.

The Republicans stubbornly and stupidly insist on disbelieving in basic monetary policy. They appear to believe that reducing revenues must shrink government, refusing to see that this simply shifts the form of taxation towards inflation.

Dishonesty. The Democrats stubbornly and wickedly continue to insist that the rich are not paying their “fair share” and there would be plenty of revenue for everything on their agenda if the money could only be pried out of the hands of “special interests.” They have to know better. They do know better. It’s too convenient a lie to forgo.

The Republicans stubbornly and wickedly continue to insist that the Laffer curve tips over as such a low rate of taxation that any tax reduction they propose will increase revenues, thus avoiding making painful cuts in spending — which rather contradicts their line that reducing revenues is good because it forces painful cuts in spending. They have to know better. They do know better. It’s too convenient a lie to forgo.

None of the preceding should be mistaken for the Tweedledee-Tweedledum talking point of Libertarians. I am a Republican, naturally. (His Majesty, curiously, considers himself nonpartisan, which should give pause to those who rant on about the merits of nonpartisan government. Don’t tell His Majesty I said so.) I think the current Democratic agenda accurately reflects their basic philosophy, which is fundamentally flawed. I think the current Republican behavior does not accurately reflect their basic philosophy, but is a policy of desperation. Starting right with spending cuts, rather than “starving the beast,” would shrink government and eliminate deficits, but it is politically impossible.

One thing is clear: It is now no longer possible to avoid a very painful economic future, thanks to the massive present deficits and the looming Social Security crisis. The only hope for avoiding economic catastrophe is to raise taxes and reduce spending and promote economic growth. Given the present political climate, it’s a forlorn hope. One might as well hope to take out an armored battle station the size of a small moon with a couple of warheads the size of a Fourth of July rocket.