Our Imperfect Work

“We must act, knowing that our work will be imperfect,” Barack Obama proclaimed in his second inaugural address. Interestingly, the Washington Post blazoned its front page with the first three words without noting the succeeding dependent clause. Yet within this clause, I believe, lies the means by which the president—and Congress—and we—can move past so many of our conflicts and face up to the problems that confront us. The solution lies not in acting, but in recognizing the imperfection of what we do. If our budgets are to be vehicles for change, then we cannot enact so many laws as if the priorities of one time and place must endure forever.

More than ever before, our recent fights carry with them the implication that victory must be complete and total, setting in stone the institutions that will rule over our successors for decades and centuries to come. “We must act,” each political party seems to say, “as if our work will be perfect, else our opponents may someday slow down or even reverse our course.” Permanent monuments must be made to some liberal or conservative agenda, regardless of whether that monument rests upon unstable ground, employs an architecture glued together from incongruous designs, or fails to leave room for the improvements that only future knowledge may reveal.

Today, if we favor Social Security, it must be maintained permanently in its ancient design. For all generations of ever-expanding life expectancies, we must allow beneficiaries to retire as early as 65, or, when feeling temporarily richer, at 62. We must even accept its 1940s stereotype of the two-parent family, with abandoned mothers required to pay taxes to support spousal benefits for which they are ineligible. Similarly, if we favor less government, we can’t just work toward that goal by reducing spending. No, we have to create permanent tax cuts even if that means running economically disastrous deficits.

If we favor helping the poor, then we can never give up support for benefits like SNAP or food stamps. These programs must be etched in the law as superior to any alternative use of those funds, including ones that might provide better opportunities to people in need. If we subsidize an industry, whether oil or alternative fuel or agriculture or manufacturing, then we must enshrine that subsidy in the tax code.

Now, of course, there’s good reason for using legislation to try to provide some certainty or security. With perfect foreknowledge, we can plan for the future. But what if that future remains uncertain? Planning for it then requires creating a way to respond to its surprises, good and bad.

Unfortunately, we’ve gone long past the point where our federal budget could be flexible. A fiscal democracy index I developed with Tim Roeper shows that the combination of entitlement growth and low revenues means that today most revenues are already committed to permanent spending programs. Almost every congressional decision to adjust national priorities has to be paid for out of a deficit, or by overturning some past “permanent” enactment.

Earlier, before entitlements became so prevalent and dominant, spending was largely discretionary. Congress also felt that we should pay our bills on time, so it didn’t finance tax cuts for today’s generations by passing those liabilities onto future generations. Though many programs survived for decades, most still had to receive new votes of support. Even more important, almost none had any built-in growth. That made it easy to let some ideas languish as others came into prominence, leaving room for new choices or reconsideration over time.

Compromise is much easier when one side or the other isn’t forced into reneging on past promises to the public. It’s easier when it’s possible down the road to proceed on the same course, pursue the same objective via a different course, or decide on both a new objective and course. It’s easier when we’re not asking our opponents to keep funding some permanent monument we want erected to ourselves.

“But we have always understood that when times change, so must we; that fidelity to our founding principles requires new responses to new challenges…We understand that outworn programs are inadequate to the needs of our time…Let us answer the call of history, and carry into an uncertain future that precious light of freedom.” (Barack Obama, January 21, 2013; emphasis mine).

The Decline of Fiscal Democracy in America: A New Video Series by Eugene Steuerle

On January 3, 2013, the 113th session of the U.S. Congress opened with a fiscal cliff averted, but a country still stuck in a less-recognized fiscal bind.

In the first video of a three-part series, I explore one of the major reasons recent Congresses have been so dysfunctional: all, or almost all, the revenue to be collected by the Treasury Department was spent before lawmakers walked in the door.

I further discuss how spending and tax subsidy programs on autopilot, along with a tax system inadequate to pay our bills and rife with gaping holes, handicap lawmakers’ and the public’s ability to set new goals for solving today’s and tomorrow’s problems.

Why Do We Keep Jumping Over the Fiscal Cliff with Bungee Cords?

Updated January 11, 2013

As I and many others predicted, we didn’t plunge down the fiscal cliff at the end of 2012. But we’ll be back at the edge again soon, for refusing to borrow the money required to pay bills Congress has already rung up, or for threatening some extraordinarily badly designed sequestration or across-the-board cut in discretionary spending. And while I didn’t think last month that politicians would let tax rates skyrocket at the beginning of 2013, and I don’t think now that they will refuse to pay foreign lenders, Social Security recipients, or doctors, I don’t like jumping over cliffs with bungee cords attached. It’s a notoriously bad use of time and energy. Plus, I don’t trust the bungee cords.

Either way, people keep asking, why can’t these guys and gals just get together and compromise?

The main answer, I believe, goes beyond silly pledges not to raise taxes or touch anyone’s Social Security benefits. It’s the failure of both political parties to come clean on either the math or its implications, and the accompanying failure to reframe the public debate after our contentious last election.

Consider the plethora of misleading political rhetoric that both parties use in playing the blame game and asserting how they are trying to protect the middle class from bearing any burden for anything, any time, and anywhere. Almost every statement by President Obama or Speaker Boehner emphasizes how much he wants to protect 98 or 99 or 99.5 percent of us from having to pay more in taxes. That a middle-class family might have to pay a couple of thousand dollars more (the Tax Policy Center estimate of the tax increase for the median-income family if we had gone over the cliff at the end of 2012) is put forward as horrendous and unfair to those who “play by the rules.”

Wait a second! We are running deficits of about $9,000 per household a year right now. Those bills don’t disappear simply because we refuse to pay even $2,000 of them currently. We merely shove those costs to the future, mainly onto the young, some of whom are too young to vote. Convincing people that they can’t possibly afford to get by with $2,000 less when they’re running up credit card bills of $9,000 a year is simply dishonest. If we aim to borrow $2,000 less from foreigners by 2015 or 2016, for instance, it may mean that by then we also must consume $2,000 less relative to what we produce as a society, even if we “play by the rules.”

Let me be clear. Most economic analysis says that a country can’t dampen consumption too quickly without threatening economic growth. Still, the basic bind that both parties placed on themselves comes from promising so much to the middle class in terms of both high benefits and low taxes. The public fight over the fiscal cliff centered mainly on taxing the rich. But spending, mainly in unsustainable growth in health and retirement programs, remains the dominant long-term issue. Confining tax increases to a very small share of the population doesn’t exempt the middle class from dealing with those issues; to the contrary, it only increases the burden they must bear in spending cuts in lieu of the tax increases they avoided.

Neither party, however, can easily go to the middle class and say, “Look at how I protected you from paying more taxes so you can now get fewer benefits.” Each side criticizes the other for not offering much on reform of large health and retirement programs, but they know the consequences for leading. If the Republican Party presents its proposal first, it knows that Democrats will immediately claim that Republicans favor cuts in, say, Medicare over yet-further tax increases on the wealthy. If the Democratic Party presents any adjustments to eligibility or benefit levels, it risks losing a large share of its constituency and abandoning the one issue on which it has won elections for so many years. It’s not that the Democrats won’t compromise, they just want to be able to blame Republicans for whatever happens to the middle class. Similarly, it’s not that Republicans don’t want entitlement reform, they just don’t want to bear the brunt of the criticism by themselves.

To make matters even more complicated, almost all the bargaining centers only on ameliorating, not resolving, our long-term problem. This means the fight will continue for years, so each party wants to position itself for the next and then the next round of debates.

The broader issue needs to be reframed, somewhat like Erskine Bowles and Alan Simpson did, with a fuller, shared-party explanation to the public that we’re all in this together. It was too late for that at the end of 2012, and will be too late again the next time we focus our attention primarily on avoiding some precipice. But without that broader type of effort, this fight is not going away for a very long time.