Tonight I happened to catch a little of the local new -- which I usually avoid, as the terribly shallow interpretation it gives for most events annoys me quite quickly1 -- and was informed that the congress and president are working to avert fiscal disaster by a combination of spending cuts and tax increases. (I admit it, during the holiday season, I tend to live in a cocoon and avoid all news, so this was actually a surprise.) Now, I do not know if I agree we are in a position where we face a particularly noteworthy fiscal disaster. We have tremendous problems, but not much worse than in the past few years. Spending is out of control, and inflationary pressures are bad, but we aren't spiraling into hyper-inflation, and, though it would harm whichever party was in power, a bit of a deflationary contraction, provided it really reduced the money supply might actually do some good2. But that is not my topic. Instead, I want to look at their plans, at least in general terms, and ask which particular aspects of fiscal discipline are better or worse for our nation, in general, and given our specific circumstances.
Normally, I would have no objections to an austerity program combining increased revenue with decreased spending.If anything, it is the textbook solution to excessive spending, and certainly the solution conservatives have favored at least since the Reagan years3, or even earlier. The logic is, at least at first glance, unobjectionable. By eliminating any spending increases, and even reducing some expenditures, the cuts put an end to the constant growth which expenditures tend to experience once a government program is launched4. But the true infusion of cash, the wealth with which to pay down the debts will inevitably come from the increased taxes. By putting cash in the hands of the state, now barred from any new spending, and with consumers forced to exercise some austerity, preventing the capital infusion of government payments from having any inflationary effect5, the situation is perfect from paying down debts while keeping government at a reasonable size. And it is the most politically acceptable solution as well. By preventing the state from having to find money for repayment by closing down programs, it eliminates much resistance, while the tax increases are made more publicly acceptable by being coupled with reductions in spending.
And taken in complete isolation, without thought of external desires, political incentives, human volition, long term outcomes and the like, it sounds like a sound proposition. I admit, as I explained in the footnotes, I disagree with some of the economic arguments advanced in its favor, but other than that, if we adopt a very mechanistic model, with very simplistic assumptions, and assume there are few other motives but the balancing of the budget and preservation of existing programs (maybe along with keeping oneself in office), it almost seems to work. But, as should be clear from all those qualifications, the "cet par"6 for this economic proposition is pretty extensive, and bears not even a passing resemblance to reality.
Let us start with some obvious truths, some of which are recognized by those proposing this solution, some which are suggested, but not states, and some which are ignored.
I.Spending cuts are the most certain way to reduce the cost of government. Increased taxes can cause changes in behaviors, resulting in reduced income7, or simple random chance may reduce revenues. If we want to be sure that spending will always be $X less than revenue, the easiest solution is to agree to always spend $X less than revenue, rather than set spending at some value and assume a tax rate of Y% will generate the required income8. Whether we pay for this quarter's spending "as we go" -- as we now do -- or use last period's taxes to pay next period's costs -- as I would prefer we do on a quarterly or yearly basis -- setting spending with reference to revenue, rather than adjusting taxes to cover spending is much easier to do. Spending can be adjusted as we go (as any business owner can attest), we can fire staff, scale back projects, reduce new expenditures and so on. Some statutes may mandate some spending, but much federal spending can be adjusted to meet revenue changes, while adjusting tax rates is a slow process, requiring legislative involvement, and so cannot be done "on the fly". However, there is the other side of this argument, as we shall see next.I believe those are enough points to set the stage for my argument, as I hope what I am going to write will be both straight forward and self-evident, at least once I sketch the basic outline. You see, while I would otherwise agree that the combination of cuts and taxes is a good approach, the problem is that the incentives for politicians, and the sympathies of the tax payers, are such that this reform may actually make matters worse, and most certainly will not do anywhere near as much to balance the budget as some other plans.
II. While spending cuts are more reliable, they are also less popular, especially with politicians, but with much of the public as well. Spending cuts, in practice, mean eliminating some service the government provides, eliminating some jobs, stopping some grants to a college or researcher, cutting scholarships or student loans, closing military bases and so on. When the public is paying a tremendous burden in taxes -- and if they are not dissatisfied with their tax burden, no politician would be pursuing austerity measures9 -- they expect to receive some benefit for that expenditure. Of course, they are willing to make allowance for the imperceptible benefit they receive from the military, police and courts -- unless conditions become so chaotic they feel even those are absent -- and they may be willing to pay if they see the benefit going to others, not just themselves, but in the end, with high taxes they expect the state to provide some commensurate benefit. And so spending cuts disappoint the public, especially when coupled with tax increases, or, at the very least, when not accompanied by tax cuts.
But it is not just the voter who is unhappy with cuts in spending. Those who propose government programs normally believe in those solutions, and do not wish to see the funding they receive cut10. At times they may demand more than they need, in order to ensure in the future cuts will not take away essential resources, they may engage in horse trading at times, accepting cuts to realize gains elsewhere, and they may compromise or manipulate in a hundred other ways, but, for the most part, they do support the spending they request, and so they would much rather see increases in taxes than cuts in spending. If for no other reason than money taken by taxes comes from anonymous strangers, while cuts in spending takes money from their project, as well as reducing both their ability to achieve their goals, and their perceived political influence.
Thus, very few are happy with spending cuts. There are a handful who ardently support any and all reductions to spending, and most of the public is willing to see some absurd example or another eliminated11, or would be happy to see some project they particularly dislike meet its end12 (though most who hold such beliefs have another pet project they would like to see receiving increased funds), but for the most part, public and politician alike are not happy to see the state doing less, whatever their political beliefs.
III. Tax increases are not terribly popular either, but tend to be acceptable the more government seems to be doing, or,barring that, if it appears there is some benefit being received from paying higher taxes. It could be the funding of a generally popular war, disaster relief, offering assistance in a widely supported cause or what have you, the people must feel that higher taxes are being assessed for some purpose, and that their payment is going toward something of some significance. Of course, this all depends as well on the tax increase itself. A trivial increase will often be shrugged off13, without a thought of the reason it has been assessed, while a truly massive increase might be unacceptable to the vast majority, even with several popular justifications. In short, For a substantial increase in taxes to be accepted, it must be justified in some way, with the size of the increase determining what amount of justification is needed, at least until we reach the point where the increase is simply too large to be justified in any imaginable way.
IV. The public is not foolish, they are aware of the many accounting tricks used to make increased funding appear to be a cut, to move spending from one year to another, to make a debt riddled budget appear balanced and the like. However, for the most part, they do not consider such things when considering the federal budget, and so, though they realize that claims should be taken with a grain of salt14, they, for the most part, accept what they are told about budget numbers,making it relatively easy to use accounting and procedural deceptions to make the budget appear other than it actually is.
V. No law is permanent, no promise is eternal, and even the Constitution can be changed. Not only that, but even without changes, there are many ways to look at an issue with a different perspective and find a solution to work around any barrier. I mention this because, specifically, of the faith many FairTax advocates placed in the clause requiring the 17th Amendment be repealed before the FairTax took effect. As I argued in several essays about the FairTax15, while they noticed repeatedly the many ways one could work around restrictions in our present tax code, as well as recognizing that rates and rules could change, for some reason they believed this clause was immutable, an absolute protection against ever seeing the FairTax being collected alongside an income tax. I won't repeat the many counter arguments I made, they can be found at the link above, but I will offer one, a simple point, that being that a personal income tax was collected during the Civil War, long before any amendment made it permissible. So, why would returning to those pre-17th conditions prevent the same thing from happening again?
Of course, some may wonder what this has to do with fiscal discipline, and the combination of tax increases and spending cuts in particular, and I would ask that they wait until a little later for complete details, but, until then, I ask they bear in mind how many balanced budget laws have been passed on federal and state levels, and how many were circumvented through various subterfuges, often in the first year they came into effect. We must keep this in mind whenever discussion of the combination of spending cuts and tax increases relies upon nothing more than a promise or a statute. If that is the case, and there are incentives for politicians to do otherwise, especially if citizens also feel it is acceptable to work around the laws, then there is no law which will stop that from happening16.
The greatest problem should be obvious from point III. The public, though able to understand the arguments for fiscal responsibility, and capable of even being motivated by the need for fiscal responsibility, tends to lose enthusiasm very quickly, and especially quickly when, as is the case with austerity measures, they cannot see any "pay off". They can stay worked up over a war for a long time, as the see the victories, or even the defeats, justifying renewed efforts. They can get behind disaster relief when they see the repairs, and the people saved. They get behind a number of issues, and maintain enthusiasm for some time, but fiscal responsibility is a hard sell, and harder to continue selling. After all, when the best one can show as an outcome is "disaster didn't strike" or "we paid off the debt", there is just little excitement. In political life, a sin everyday life, perhaps even more so, people have a hard time showing enthusiasm for dull, responsible behavior.
And so, though the government may easily pass both types of austerity measures, higher taxes and reduced spending, it is not easy to maintain both. The public, paying more, comes to expect something for their tax payments. And when, instead, they see news reports about paying more and getting less, about how much more past generations had, when they are told (rightly17) they work for the state through the end of July, or longer,they begin to agitate for a tax break, or, if that is not possible, then at least that the government reevaluate its priorities to "give something" to the middle class.
And that demand is music to a politician's ears. After all, the term "middle class" is so nebulous as to be all but meaningless18, and even if it were not, as the Commerce Clause has taught us, any project can be shoehorned into any cause. So it is not hard to paint anyone's favorite pet project as an effort to provide some relief to the belabored tax payers, giving something back.
Nor is it necessary that those politicians doing so are being dishonest. After all, likely by the time the complaints have arisen, the debt has been paid down somewhat, the rate of growth has slowed, and the surplus funds seem larger relative to the remaining debt, making it easier to justify taking a little bit to pay for this or that essential project.
The logic of that last argument demonstrates another problem with attempts to make debt payment permanent, or even continue them over a considerable time. Assuming the surplus from tax increases and spending cuts remains constant, or, as things improve when government debt declines, increase, they will represent an ever increasing percentage of the total debt, making the rate of payment seem to rise rapidly. Of course, in truth, the payments themselves may be constant, but it is easy for a politician to see that rising percentage, and to so present it to the public, and make it seem we have gone to extremes in our fiscal responsibility, and that sufficient funds exist to allow us a little new spending.
Then, of course, there is the other possibility. Should, for whatever reason, the economy show signs of decline19, it is all but inevitable that the many neo-Keynesian economists beloved by government will come forward to blame the slump on decreased government "investment", and suggest some sort of modest spending to revive the economy. Which, should it come to pass, is a sure way to end any spending reforms. After all, if it succeeds, the economists will claim to have proved that the previous level of debt was healthy, and so spending cuts will be discredited and quietly abandoned. (Though, as I shall show shortly, taxes will probably not decline.) On the other hand, should the stimulus fail to help the economy, it will be used to justify a larger stimulus, as clearly the previous effort was too modest. And this argument will be repeated again and again, until the economy finally recovers, again proving their case, and showing that cutting spending was a bad idea20.
Whatever may happen with spending cuts, should they be slowly eroded through exceptions, or made invalid by the accumulation of new spending, or completely demolished by supposed proof that stimulus is needed rather than fiscal responsibility, there is one certainty, taxes will not decline, or will not decline in a substantial way.
As I said above, it is relatively easy to justify taxes to the public, provided you give them something. And in each of the cases mentioned, be it restoring spending that was cut, creating new programs, or the birth of some sort of stimulus plan, the state will have something to show for their tax increases, and thus will, for a time, have no trouble arguing the public is getting their money's worth. And, should the support erode over time, the state can simply enact some new spending,and once again argue that the money is well spent. Unlike the fiscally disciplined position, which has nothing to show but better numbers on a balance sheet, the avoidance of disaster that is impossible to conclusively prove would have come, and a very slow, gradual improvement in the overall economy. And the last can be easily claimed by any other government program, as small, slow improvement always has a million fathers when it comes to the government. The congress when the rise started, the current congress, the current president, every president preceding him, changes to the tax code, what was not changed, the Federal Reserve, the private sector, each and every law, agency, department and individual bureaucrat, and that is just the top of the list. When things improve in a way so gradual no immediate cause is obvious, it is claimed by everyone, and so, though fiscal responsibility brings about such improvement, no one will ever believe it to be true.But the quick jolts of apparent improvement from government spending, or the output of whatever projects are created, those can be seen, and can justify quite a hike in taxes, and thus, whatever eventually eliminates all the spending cuts, or at least reduces them until they nearly vanish, taxes are almost certain to remain as they were21.
Yet that is not the sole problem with this approach. Besides the incentives and public pressures to cut the legs out from under such reforms, there are also many deceptions and government policies which can make spending cuts meaningless. We are all well aware of all the dodges used to meet the technical requirements of balanced budget laws, while falling far short of a truly balanced budget, does anyone think the government will do any less when confronted with any other sort of fiscal discipline?
First, I imagine those confronted with cuts would try to ensure that their pet projects have a level of spending mandated by law. This isn't all that unusual. Welfare programs, for example, must pay recipients who qualify, and at a fixed rate, so no spending cut can be used to reduce that amount. And if projects can be said to include some sort of fixed payments mandated by law, it would obviously be unfair to require the whole department meet some percentage cut, as their mandated spending would mean the cut would fall even harder on the rest of their spending. And so, quite likely, many mandated expenditures would either be exempted, or else the departments in question may be treated differently or exempted entirely.
Second we have the tradition, long known by voters but still not well understood, of calling "cuts" any spending level which falls short of some arbitrarily established expected increase. That is, if my department has a $100 million budget, and I expect 10% growth next year, if the budget allocates me $108 million, I can call it a cut of 1.8%, even though, using this year's spending alone, it was truly an 8% increase. Clearly, the government will, in assessing cuts, be well aware of this, and define cuts precisely. But will the public know which is which? If a department wishes to claim they were hit too hard, they can easily inflate the scale of their losses in new spending. And likewise, if the government as a whole wishes to minimize cuts while still telling the public it is being frugal, it too can avail itself of this subterfuge.
There are more, but I think my point is clear, cuts are easy to negate, to erase with new spending or restored spending on existing projects, or simply to make only on paper through a variety of deceptive practices. However, taxes, once enacted, are far more likely to persist. And so, while it seems sound policy to balance the budget with a combination of cuts and taxes, I would argue instead that our first steps should always be to cut, and cut alone. Only once we have established a clear pattern of fiscal responsibility, once we are used to less spending, smaller government and come to think of the state less as a Swiss Army knife, capable of doing anything and more as a corkscrew, flocking gun or Allen wrench, a special tool of limited uses, only then could e consider raising taxes, and even then, not to allow us to maintain current spending, but only to accelerate the rate at which we pay down our debts, to allow us to avoid losing even more interest and put ourselves on sound footing even more rapidly.
Unfortunately, I doubt this will ever happen. The state is far too comfortable with raising taxes whenever it feels a need, and so even when contemplating fiscal discipline it still follows the behaviors it learned in the era of tax and spend. And since such a combination, when we consider public behavior and the incentives effecting politicians, is likely to result in spending quickly returning to former levels, or even rising, while taxes remain the same, I doubt we will see anything approaching a decline in debt anytime soon.
1. I don't mean to sound arrogant here, but I can think of no better description. The short, factual blurbs about actual happenings in the local area are unobjectionable, but it seems they inevitably degenerate into the most simplistic of DNC talking points. If there was a shooting, it is the fault of lax gun control, or parents who dared to own guns. If there is an economic slump, it is due to insufficient government investment, or a poorly managed money supply. If there is any accusation of insider trading or any other charge involving Wall Street, they begin to sound like the hairy man with a loud speaker at the most recent Occupy Whatever rally. So, when I say they are shallow, I mean just that. They are not only partisan and didactic, they do even that using the most superficial and idiotic arguments, the type that embarrass even orthodox liberals. I suppose it is the result of living in a one party state, the faculty for argument tends to atrophy among the true believers. Which would not be a problem were we not situated near Washington, convincing every news reader he or she will be the next big thing in national news (and, sadly, we have sent a number of vapid liberal mouthpieces to CNN and MSNBC) so they feel they must pontificate, despite their obvious limitations. Actually, I think I sound even more arrogant now, rather than less. But trust me, if you were to watch Maryland news for a while, you would begin to describe it in terms quite similar to mine.
2. It is interesting, but this fits with my last post, "Help and Harm", as it is another subject where conventional wisdom and popular expectations are just wrong. (Cf "When Help Hurts", "When Help Hurts II", "Bad Economics Part 11" and "With Good Intentions".)The contraction of 1981 for example, was seen as a financial crisis, and yet, in truth, it was a good thing, as it allowed for the end of Carter era large scale inflation, and reduced the money supply relative to actual assets. Similarly, the contraction at the end of the Clinton years and beginning of the Bush administration (up to 2001, when other factors became involved), was a sensible reaction to the excesses of the preceding inflationary years. And I think the same is true here. Whoever presides over the inevitable contraction, be it Obama or his successor (unless someone resorts to hyperinflation and sends us into a different crisis), will probably never hold office again, but will do considerable good for the nation. We need to undo the monetary growth and overspending from about 2006 to present, but we cannot do so without come contraction, and the pain involved. See "Hair of the Dog?", "Solving Problems We Created", "In The Most Favorable Light", "With Good Intentions", "Grow or Die, The Inevitable Expansion of Everything", "Government Quackery", "Life Is Not Fair - And Trying To Make It So Makes Things Worse","Bad Economics Part 19", "Antibiotics, Automobiles and the Free Market" and "Just What We Don't Need".
3. Granted, this may not have always been the course followed during the era, by Reagan, conservatives in general or the government as a whole, but it was the solution most often proposed by conservatives. Whether it was simply a position adopted for show, or was a true belief they failed to achieve, I leave to the reader, though personally, I accept that most people are relatively honest about their beliefs, even if they often fail to meet those standards they set forth. See "Hypocrisy?", "Deadly Cynicism", "Self-Serving Cynicism and Our Cultural Immaturity", "The Presumption of Dishonesty", "All Life in a Day, or, How Our Mistaken View of History Distorts Our Understanding of Events", "Catastrophic Thinking, The Political, Economic and Social Impact of Seeing History in the Superlative", "The Path of Least Resistance", "Misguided, Deceptive or Evil?", "In Defense of Civil Debate", "The Nature of Evil", "Life Without Villains", "Enemies Into Villains", "Rethinking My Earlier Position", "Three Versions of Evil and the Confusion They Cause", "Tyranny Without Tyrants" and "Missionary Zeal and Human Discord".
4. See "Recipe For Disaster", "The Endless Cycle of Intervention", "The Cycle of Compassion" and "Grow or Die, The Inevitable Expansion of Everything".
5. I do not accept that spending can cause inflation. It may cause a transient price increase, but it will not last. True inflation is an entirely monetary event, caused by growth in the money supply, most often under a system of fractional reserve, and normally only under more centralized versions of the same. See "Inflation and Uncertainty", "Bad Economics Part 7", "Bad Economics Part 8", "What Is Money? ", "What Is A Dollar?", "The Gold Question, Not "Why?" But "When?"" and "Bad Economics Part 19". However, as this concern is often expressed by conventional academics outside of the Austrian school (and some of the Chicago school), I feel the need to mention it, even if I find it a silly worry.
6. "Cet par", for those who don't read much economic writing, is short hand for "ceteris paribus", or "all other things being equal". It is used to indicate that only the specified parameters have changed and all other factors have remained constant. In other essays I have laughed at how poorly "cet par" mirrors the real world, sometimes even forcing theorists to ignore changes that are inevitable outcomes of the event they are studying. And, in this case, we must assume that the politicians in question are very highly resistant to change, and do not respond to many incentives offered by this plan, as otherwise the outcome may be quite different, as we shall show soon.
7.Just to offer a few examples: Increased taxation may dilute individual fortunes, resulting in less capital available, slowing business expansion and reducing predicted revenues. Increased taxes may make it more attractive to relocate overseas, invest in tax shelters, invest in tax preferred bonds or foreign companies, or simply cheat on taxes. If the tax system is highly progressive, an additional increase in the marginal jump in rates may make individuals choose not to work extra hours or take pay raises, reducing overall income. Increased rates will certainly reduce disposable income, which will reduce consumer spending, possibly even driving some firms or industries out of business. If the tax increased has any matching components, it may also increase the cost of new hires enough to discourage employing new staff, reducing overall income for the economy.
8. Clearly, any spending plan that involves ongoing expenditures paid by current revenue will involve some guesswork. The best solution would be to tax yearly, or quarterly, and fund the upcoming period with the taxes of the prior period, but for many reasons we moved away from anything resembling that. So, until we are ready for that reform, we must instead estimate income. Still, if we estimate income and use that to set spending, we can easily adjust spending as revenue proves higher or lower. On the other hand, if we commit to a set spending level in advance and pick tax to match, we cannot adjust taxes until the next legislative session, and more likely one or more years after the next legislature meets. So even with estimation, tying spending to revenue, rather than setting taxes to support preordained spending is still more stable.
9. I do not mean to sound cynical, or suggest politicians act only in their own selfish interest, but politicians are like anyone else on earth, if things are going well in some area of life, if they are content -- of, in the case of politicians, if the voters are content -- they will rarely look into that matter. A few may have time to try to improve on things not broken, and a handful with strong feelings about a specific topic may raise it despite voter indifference, but the system of elections will make such actions unlikely, as those who pursue matters of little interest to the voters, or wasting time on them when other matters are available, will often lose their office. So, until the public feels some discontent over the balance of benefits provided versus taxes levied by the state, politicians are unlikely to worry about spending or taxes. I suppose, if it seems a financial crisis is in the offing, then the matter may arise without voter discontent, but, for the most part, when it seems there is impending disaster, that piques voter interest, and this becomes an issue with voter support once again.
10. It is possible a few propose measures they do not support to achieve other goals, but, for the most part, I accept that those suggesting the government become involved in a matter are truly in agreement with the position they put forth. See "Grow or Die, The Inevitable Expansion of Everything", "In The Most Favorable Light", "With Good Intentions", "Tyranny Without Tyrants", "Perverting Self Interest ", "O Tempora! O Mores!, or, The High Cost of Supposed Freedom", "The Inherent Disappointment of Authoritarianism", "The Right People, The Wrong People and "Just Plain Folks"", "Misguided, Deceptive or Evil?" and, finally, "The Lie of Environmentalism", the last of which actually deals a specific application, to wit, my examination of the various ranks of the environmentalist movement, along with their goals, real and purported, which, though it finds some suggestion of dishonesty, argues, for the most part, the rank and file believe just what they say.
11. I wrote before that pointing out specific wasteful expenditures is pointless. (See "The Waste Book is a Waste") It generates a brief indignation about a single stupidity, but it also allows those favoring big government to brush it away as an aberration, and then ignore the larger questions about what is and is not a valid expenditure. Yes, it is mad to spend taxpayers' money on researching the effect of beer and garlic on the appetite of leeches, but it is equally improper to spend their money on a massive, intrusive federal bureaucracy. By concentrating on the former, we often manage to obscure the latter, which spends, thousands, tens of thousands, even hundreds of thousands times as much every year.
12. It is always interesting to hear partisans suggest what should be cut, be it liberals seeking the reduction of the military or of "corporate welfare", or conservatives seeking to reduce or eliminate various welfare programs of a more individual variety, along with the Department of Education, Department of Labor, NEA, PBS and HUD. When the topic arises, almost inevitably, left or right, proponent of less government or more, the first sentence about what should be cut will also include the words "would be better spent" and a suggestion of some other area to absorb whatever is saved in the proposed cuts. In short, though most of them do it unknowingly, those who want to eliminate specific parts of the government are not consistently arguing for a reduced state, they often simply wish to shift the money around, to better match their priorities. See "The Single Greatest Weakness", "Doing Something", "Don't Blame the Politicians", "Inspections, Regulations and Bans", "A True Conservative Platform" and "Minimal Reforms".
13.One must recall two things when considering tiny increases. First, what qualifies as insignificant is a function of income and assets, and expectations about their future, so what is trivial in a good economy with much surplus cash, may be unacceptable during hard times. In addition, an increase that was once trivial may be made into an issue should some politician decide to argue the case. For example, the periodic upset over fees remaining from depression era program or the Spanish American War tend to be over rather paltry amounts, but the purpose is so absurd that politicians looking for a cause can make them into issues, regardless of their size.
14. The public, in general, knows that partisan claims about the budget tend to be self-serving, and even claims from administration sources, be they "bipartisan" or an organ of the White House or congress, tend to also promote a position favorable to the government. However, they adopt a position rather like the cynical view of our legal system, that competing liars will uncover the truth. Thus, they imagine that any lie that is too large will be caught and exposed by the opposite party, and so, any claims that are unchallenged, or are only weakly disputed, are close enough to the truth. Unfortunately, while parties may lie for their own benefit, in some regards both parties -- at least in terms of incumbents -- have a shared interest in maintaining government spending, and so they are cooperative liars, not competing ones. Or, to be a bit less harsh, they both have reason to choose numbers that make the government's case that it deserves funding, rather than demonstrate that funding should be cut. (As I argued elsewhere, we need not assign sinister motives. A simple faith in the power of the state to make things better would justify choosing numbers showing government success rather than failure.)
15. See "Short Reply To Doctor Adams", "Why I Dislike the FairTax" and "Another Reply to Yt_knight".
16. See "Bar Fights, Riots and Drug Markets - The Limits of Law".
17. I am quite happy we have so many who point out how heavy our tax burden is. However, in this specific case, the knowledge they present can easily be used by those who renew spending to argue that the fiscal conservatives are going too far, that we have massive revenues and should be able to support some small new projects, as those who pay so much deserve to get something in return. In fact, this is one of the chronic problems of expansive government, it is always easy to argue that we should pay for something else. See "The Single Greatest Weakness".
18, See "What About Everyone Else?",as well as "The Other 99%", "Obama's Economic Plans Revisited", "Some Questions from the Obama Speech", "Beware Populist Deception" and "Envy Kills II". Of course, I have always wondered at the political obsession with the "middle class", it always struck me as suspect, like the fascination with small business or farmers. I thought the government was supposed to represent all equally, not be the voice of the middle class, business with a low net worth or those who toil in the earth. But, it does sound quite good in soundbites to be the the champion of the middle class, so we will likely hear it forever. See "The World's Oldest Myth", "Bad Economics Part 6", "Fear of the "Big"", "Stupid Quotes of the Day (January 17, 2012)", "The Little Guy Can't Compete" and "Small Business Fetish".
19. It is almost inevitable that at least one sign taken as a negative indicator will appear. As the government spends less, it will have less debt to monetize through the Federal Reserve, and so inflation will slow for a time, leading to signs that the economists will take as "deflationary". And likely, the decreased spending will cause some hardship in sectors of the economy traditionally supported by government spending. However, these deflationary indicators, and slumps in public sector and related industries, will be accompanied by increases in other sectors, and a general stabilization of the currency, so it is hard to sell the situation as a crisis. But, I would imagine, given their own doctrine, and the ease of befuddling the media and public with Keynesian gibberish, these would be sold as harbingers of doom. See "CNN's Keynesian Nonsense", "The Theory That Wouldn't Die", "Spend for the Fatherland, Citizen!", "Environmentalism For The Economy?" , "Why"Negative" Economic Indicators Are A Good Thing", "Bad Economics Part 11" and "Overly Simplified Economics and Confused Interpretations".
20. I have discussed this "heads I win, tails you lose" approach a number of times. See "Government Quackery", "Rewarding Failure","Inescapable Logic", "The Cycle of Compassion", "Recipe For Disaster", "The Endless Cycle of Intervention" and "Grow or Die, The Inevitable Expansion of Everything". I also discussed the other element, the method of trying a "solution" over and over until the result matches predictions, and then claiming success, in my essay It Takes But One Victory. What amazes me is how obviously dishonest this approach is when one gives it a moment's thought, and yet many, including critics, seem to fail to notice, and actually accept such arguments when presented to them.
21. It is conceivable some politician will grandstand about offering tax relief and make some trivial cuts in the tax rates for a few middle income brackets. But, for the most part, I would imagine this sort of fiscal reform is far more likely to be undone by reducing spending cuts, rather than reducing taxes.
One step I did not mention here, but one that will be essential should we ever desire to enact true spending reform, is a change to our monetary system. It is too complex to discuss here, and so I shall probably write a separate post about the topic, but, to explain briefly. Our present monetary system relies upon government debt to provide backing for our currency, the way gold once did. If we end the era of chronic, massive debt, and keep within our means, there simply will not be enough debt for the Federal Reserve to function as its legal structure requires. Of course, no one truly believes government debt in any way provides real security for our currency, so it could easily be eliminated, but for the laws. Still, if we stop our habit of deficit financing, or even reduce the scale of debt to a more manageable size, we will need to find a new way to establish reserves to back out currency. I would obviously argue for a return to gold, but I somehow doubt it will happen. But, gold or not, if we become responsible in government financing, we will need a new basis for our currency. (See "Inflation and Uncertainty", "Bad Economics Part 7", "Bad Economics Part 8", "What Is Money? ", "What Is A Dollar?", "The Gold Question, Not "Why?" But "When?"", "Monetary Issues Made Simple Part I", "Monetary Issues Made Simple Part II", "Stupid Quote of the Day (January 7, 2012)", "Wolf or Sheep", "The Inflation Engine", "Those Greedy Bankers", "Explaining Past Crashes" and "Bad Economics Part 19".)