Voters Prefer Deficit Reduction Rhetoric to Action

August 17, 2010 RSS Feed Print
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It’s been a recurring contention of mine that voter anxiety about out-of-control spending is paper-thin, and that Republicans would be well-advised not to over-interpret a big win in November and should prepare to meet fierce resistance to serious entitlement reform.

So imagine the upward arch of my eyebrow upon reading Jonathan Weisman’s front-page story in this morning’s Wall Street Journal—“Voters Back Tough Steps to Reduce Budget Deficit.”

Then I read the actual text of the story, which demonstrates no such thing. It’s a patent case of a newspaper editorializing—of thinking wishfully—on its news pages.

As a former newspaperman, I hasten to point out that reporters do not write their own headlines. They do, however, write their own ledes: “Frustrated voters, fixing on the $1.5 trillion federal deficit as a symbol of Washington’s paralysis, appear increasingly willing to take drastic steps to address the red ink.”

Unless by “increasingly willing to take drastic steps” Weisman meant something more akin to “increasingly willing to entertain the idea of taking drastic steps,” then his central assertion is as misleading as the headline.

The good news: The Journal conducted a focus group consisting of 12 Virginians (four Democrats, four Republicans, and four Independents). One of them, a 67-year-old man, said he’d accept “higher Medicare co-payments and deductibles.” A 56-year-old Republican man said he could live with a national sales tax.

Intriguing, sure, as far as anecdotal evidence goes.

But:

The focus group, however, also showed evidence of the perils most in Washington seek to avoid. Craig Christmas, 38, a Democrat and public-school guidance counselor, said he didn't want to cut education or see his taxes rise. Randy Rowekamp, 61, a retired information-services worker from Midlothian, Va., who describes himself as an independent who leans Republican, railed against Washington profligacy and was reluctant to embrace specific cuts.

"You hurt people. There are people living on Social Security. If you start taking that away or lowering it, you're impacting a person's life," he cautioned. Ms. Davis, the photographer, adamantly opposed raising the eligibility age for Medicare.

Later we move on to initially encouraging recent Journal/NBC News polling data, which found that 74 percent “said it would be acceptable to change Medicare to provide larger subsidies for low-income seniors, while cutting subsidies for the more affluent.” And “64 percent would accept capping Medicare and Medicaid payments to healthcare providers, while 58 percent backed subjecting incomes over $107,000 to Social Security taxes.”

[See 5 debt management tips Obama can take from the British.]

This is more than intriguing.

But:

57 percent found cuts to national security and defense weapons systems unacceptable. Slowly raising the retirement age to 70 to reduce Social Security costs was acceptable to only 36 percent of those polled. Raising the eligibility age for Medicare was even less popular.

"Folks want to cut the deficit, but they say, 'Don't touch my Social Security. Don't touch my Medicare. Don't cut defense spending, and don't raise my taxes,"' said Rep. Gary C. Peters (D, Mich.), another member of the House budget-cutting task force. "This is going to take courage."

So we’re basically right back where we started: in the same old muddle of sweeping rhetoric and damnable details.

Rep. Peters is exactly right. Tackling long-term budget deficits is going to take courage.

Dare I raise an Obamacare analogy: Entitlement reform will have to be “rammed down our throats.”

Tags:
Gary Peters,
social security,
debt,
Congress,
taxes,
deficit and national debt,
Medicaid,
Medicare

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The deficit is just an accounting identity. It represents the difference between saving and investment in the private sector (plus imports) because what the public sector spends the private sector is able to save. Here's a simple explanation based on the work of Keynesian economist Wynne Godley on the dynamics of sectoral balance within a national economy;

"Let’s divide the economy into three sectors: private, government,

and external. If one sector spends less than its income (i.e.,

saves), one or both of the other sectors must be spending more

than their income (i.e., dissaving or running a deficit). The aggregate identity looks like this: (S – I) + (T – G) + (M – X) = 0

We can rearrange the equation as (S – I) = (G – T) + (X – M) where (S – I) is the net saving of the combined private sector households plus firms. The second term, (G – T), is the overall

government balance, including federal, state, and local governments. When the government is running a deficit (G > T), this

term is positive. And finally, (X – M) is the current account balance. When the current account is in surplus, this term is positive. In a closed economy without a government sector, saving

always equals investment. If the private sector is to save more than domestic investment, then there must be other sectors willing to run deficits. A government deficit, for example, is an injection

into private income, and hence generates saving in excess of

investment. The rest of the world is in a deficit position relative to a country with a current account surplus, which, again, is an injection into the domestic income flow. Therefore, the public and external sector deficits are what allow, or “finance,” the private sector’s saving in excess of domestic investment...When the government sector goes into deficit, the shortfall equals the additional private sector saving (or reduction of private sector deficit), plus additional net imports."

http://www.levyinstitute.org/pubs/ppb_113.pdf

Because we have a large current account deficit, which represents a leakage of private sector savings, government deficits must rise by the same amount or private sector saving will fall (unless exports rise). The twin demand leakages of the trade deficit and the growth of private sector saving must be balanced by increased government deficits not lower ones. If surpluses occur in the public and private sector simultaniously along with big trade deficits, the US economy will come to a halt due to a total collapse of effective demand.

Government spending is just one aggregate of total effective demand in the US economy; so long as the twin leakages of a trade deficit and private sector savings increases reduce overall effective demand, the government must run a deficit to sustain economic growth. Failing to do so will not only result in economic stagnation but in even bigger federal government deficits than would be the case with more, mostly nondiscretionary, federal spending.

steve of IL 1:07PM August 18, 2010

The government's a spend junkie.

The Dems and Repubs are the same,

Addicted to the spending spree,

Then spinning it in the blame game.

To get elected the pols say

All what the voters want to hear.

Once elected, all pols do play

Self preserve politics of smear.

Cutting spending 'tis not for weak.

We must elect those who have spine

To do what's needed, not just speak

The same old spending junkie line.

Government spending must be cut,

Not stuff I like, anything but.

Ima Ryma of IL 4:35AM August 18, 2010

inside the beltway rhetoric is common place, courage is a scarce commodity.so the chance of anything meaningful being done on controling deficit spending is a pipe dream.

spending of NV 1:34AM August 18, 2010

Scott Galupo

Scott Galupo

Scott Galupo is a Washington-based freelance writer. He formerly worked for House Republican Leader John Boehner, and was a staff writer for The Washington Times.

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