Representing All Americans

A unfortunate tenet on the left and on some segments of the right, is to accept that the government can justly represent just a small slice of the electorate; one's supporters, or base, interest groups, and political allies. But the reality is that for there to be any true level of justice in our political system, our leaders must truly represent all Americans. They must design policies and laws with this fundamental principle at the forefront of their minds; because, while as a political system we believe in majority rule, we also have a strong commitment to minority rights. No in-group or out-group should be offered special privileges or unfair treatment. Every American should be treated equally under the law.

It seems like a relatively simple principle when stated in a succinct manner, yet unfortunately it is frequently and readily ignored by America's politicians. It is a staple of the Obama administration's political ideology. For those on the left it is more than simply appealing to their base or providing pork to associated special interests, but a deeply enmeshed belief that the government has a responsibility to treat individuals differently in certain circumstances. Government, from this perspective, serves to ensure specific outcomes, or at least push the outcome in the desired direction. Explicitly, it accepts the notion that a just government should focus on the end result, aiming to create some arbitrary notion of equality—an impossible and unjust task.

When Obama lauds his success, as he recently did at a United Auto Workers' conference, of "saving" the auto industry, this ideology is displayed in its most unflattering light. If one was the chairman (or czar) of the auto industry, he would surely applaud the preservation of his interests. An individual, in the role of autoworker or auto company owner, may be ecstatic at receiving special dispensation, tacitly ignoring both those that paid for their rescue and those who were not rescued. But receiving such perks of money, influence, or connection, however historically common it may be, does not make it the proper way our system should be run.

However the argument here is not about the economic efficacy of such policies—there are plenty of economic rejoinders that would challenge those that tout such bailouts as fiscally sane, which can be addressed elsewhere.^[1] What is at question is the ideology that the government has the right to treat one group differently than another. These type of policies support the incorrect belief that the government can (justly) protect or injure certain segments of society using arbitrary criteria (and yes, regardless of how logical such criteria may be to one or another, they are arbitrary when they discriminate between different individuals). 

The problem, to be fair, is not singularly one of the left, but also unfortunately present on the right. When Rick Santorum stands on the podium arguing for special treatment for manufacturers through tax incentives, he concedes reliance on the same backward philosophy. When congressmen from agricultural red states fight for special subsidies to farmers, they too erode the just role of government. When oilmen or bankers (or union-members) are given carve-outs, the same philosophy is at work.

This is an issue that goes beyond the charges, often correctly made, of "picking winners and losers," which is certainly problematic. The problem is the vision of government that does not consider all Americans as equal before the law. That is an ideology that, for whatever electoral or political reasons, believes that a politician can treat different Americans in different ways. 

While the political roots of this problem are understandable, the long-term consequences are potentially disastrous. Our system has moved a long way from its foundations, where the government was supposed to serve as an impartial arbitrator, as an entity that facilitated the common space but did not try to fill that space, to a near feudal model of patronage and special privileges. The system, historically speaking, may never have worked as philosophically as it strove to—there are certainly too many examples of its failure—but historically (or maybe its simply an effect of rose-tinted lenses) the philosophy seems to have greater popular currency. Today, it appears to be rarely thought of or discussed. 

American politicians need to strive to represent all Americans and the electorate should hold them to that standard. If the people eschew demands for special treatment, the politicians will have to change their electoral strategy. If privilege to the few at the expense of the many becomes anathema in the American political system (right now it is only anathema if the "few" are not you), it will help rebirth the idea that the government needs to represent all Americans, providing a system that is nimble, light, and does not impede the individual. The alternative is a bloated, heavy, and cumbersome system (daresay European) that struggles under the weight of entitlements and carve-outs. The latter is a system that not only veers away from the correct formulation of a just government but will crush the unique spirit that has made America great.

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[1]Did an investment in the auto industry reap the best return for the government's investment when compared to other options? Could that money have been used to create or save even more jobs in other sectors or been better used by the taxpayers? Is having a large auto industry really in the best long-term interest of our economy? Would it have been smarter to facilitate structural changes in the economy rather than prop up a failing industry? Certainly, demonstrating that the auto industry is alive today and that jobs have been "saved" in isolation, as proponents are wont to do, does little to answer if the bailout was a smart financial decision.

The Entitlement State

The Wall Street Journal provides what they call "a short history of the entitlement state."  Unsurprisingly, the essay concludes, "The looming debt downgrade only confirms what everyone knows: Congress has made so many promises to so many Americans that there is no conceivable way those promises can be kept."


The Journal is right to peg so much of our dire fiscal straights on the over-inflated welfare state.  Beginning under FDR in the 1940s, the WSJ tracks the growth of entitlements through LBJ's Great Society and the Social Security problems of the 1970s and then onto Obama's profligate spending today.  While correctly arguing that the left's counter-argument of military spending is a red herring ("But national defense spending was 7.4% of GDP and 42.8% of outlays in 1965, and only 4.8% of GDP and 20.1% of federal outlays in 2010. Defense has not caused the debt crisis."), the editorial is fair to pin some of the blame on the GOP.

Mr. Bush and Republicans did prove after 9/11 that the Washington urge to spend and borrow is bipartisan. Republicans launched a Medicare drug benefit, record outlays on education, the most expensive transportation bill in history, and home ownership aid that contributed to the housing bubble. The GOP's blunder was refusing to cut domestic spending to finance the war on terrorism. Guns and butter blowouts never last.

Whatever nuanced disagreements one has with this argument, the fact is clear that the federal government is spending far beyond its means.  Much of this is arguably the by-product of a process that encourages a lack of forward-thinking.  The American system - and to some degree human nature - encourages politicians to dole out perks today while placing the costs on future citizens.  As time progresses, entitlements are increasingly piled on and rarely are forward-looking politicians able to remove these newly constructed "rights".  Political and moral arguments are marched out to defend these handouts and so the fiscal burden grows.

To be fair, the blame cannot solely lie with politicians, but must also lie with the electorate who votes for politicians who swing perks their way.  Individuals and groups across the political spectrum lobby politicians for special treatment, not realizing or simply not caring that someone else will have to pay for it.  Even the most stalwart small-government folk are resistant to relinquishing the handouts that they receive (Medicare?).

This is a losing mentality - a short-sighted and fatal way-of-life.  Americans have, for far too long, thought about the benefits they receive from the government separately from the costs that are required to pay for these perks.  It has always been someone else or some other generation that will pay.  But this model of government has proven it cannot endure for any prolonged period of time.

The fiscal sanity of our government and the future of the state demands that we, as a nation, rework our way of thinking.  We have become far too comfortable, as individuals and a society, living beyond our means, but it cannot continue.  Citizens need to reevaluate what they expect to have and what they want others to provide for them.  Remember the government does not produce anything.  Whatever is provided by the government comes in one end and, with some loss along the way, goes out the other.

Government should be restructured to perform the essential duties for which a government is needed; namely providing certain common goods (roads, defense, rule of law) that all citizens benefit from and are unsuccessfully provided by the private market.  It should largely cease its role as a wealth re-distributor, both across time and class.  Whatever the argument one has about this program or that program, the fact is they are unsustainable in our society.  The welfare state has only been maintained over the past seven decades because of the wool over America's eyes - it has been stomached because nobody has been paying for the full extent of the entitlement state.  This ultimate grand bargain has allowed politicians to appease both those who want more and those who do not want to pay more (oftentimes the same people).  But the free lunch has ended and Americans must reconcile themselves to reality - we can never over the long-run get more than we produce.  Americans must realize that government is not a magical tool to solve society's woes or to enact some vision of morality, but a limited means of coordinating essential services that a society needs.

A Message from Chaz

Charles Krauthammer sends a message of warning to the GOP to not take the debt limit fight to the cliff.  Arguing that Obama has politically "outmaneuvered" the Republicans, he believes that the GOP needs to forgo a large reform package in order to "call Obama's bluff".  Instead they should opt for a short-term package and then address the reform issues later, putting the burden of failure on the Democrats.

If conservatives really want to get the nation’s spending under control, the only way is to win the presidency. Put the question to the country and let the people decide. To seriously jeopardize the election now in pursuit of a long-term, small-government, Ryan-like reform that is inherently unreachable without control of the White House may be good for the soul. But it could very well wreck the cause.

This seems to be sage advice.  As John Podhoretz reports at Commentary, a recent Quinnipiac poll suggests that if the US defaults on its debt, Republicans will be blamed by a margin of 48-34.  Republicans are right to be angry at the left's intransigence and unwillingness to seriously address our crumbling fiscal condition and are correct in the prescribed medicine of entitlement and tax reform.  Nevertheless, they must not lose perspective of the broader conflict.  It will be impossible to make the needed ideological shifts in our government, if the GOP cannot maintain a position of leadership.

The McConnell Escape Plan

Poor Mitch McConnell (R-KY) is getting slammed for what he has called "a sort of last-choice option[in the debt debate]."  The senate minority leader has proposed what seems to be a reasonable way for the Republicans to escape from the stalled negotiations over the debt limit, while putting the Democrats on the defensive.  Yet, very few seem to be thrilled with McConnell's proposal.
The proposed plan would allow Obama to unilaterally raise the debt ceiling at set times and set amounts with Congress possessing the right to prevent an increase with a 2/3 vote.  This would go into effect without any deal on taxes, entitlement reform, or spending cuts.
At first glance, such a proposal appears to be a timid withdrawal and much of the far right base is livid.  Over at RedState, Erick Erickson calls McConnell "Pontius Pilate" for his "historic capitulation".  Michelle Malkin howls that it is "another mortifying McConnell head-banging-against-the-wall moment."

While the base is right to be angry at missing the opportunity to really reform the system, their anger is woefully misplaced.  McConnell's plan certainly is not optimal.  Any ideal plan should reform both the tax and entitlement systems.  However, it is a second-best backup plan - one that is preferable to realizing too late that the Democrat's truly are willing to sink the country's economy in order to maintain a surfeit of entitlements.

The Wall Street Journal spells out the logic the best.

Republican Senate leader Mitch McConnell said yesterday he's concluded that no deal to raise the debt ceiling in return for serious spending restraint is possible with President Obama, and who can blame him? 

... 

The debt ceiling is going to be increased one way or another, and the only question has been what if anything Republicans could get in return. If Mr. Obama insists on a tax increase, and Republicans won't vote for one, then what's the alternative to Mr. McConnell's maneuver?  

Republicans who say they can use the debt limit to force Democrats to agree to a balanced budget amendment are dreaming. Such an amendment won't get the two-thirds vote to pass the Senate, but it would give every Democrat running for re-election next year a chance to vote for it and claim to be a fiscal conservative.  

... 

Even if Mr. Obama gets his debt-limit increase without any spending cuts, he will pay a price for the privilege. He'll have reinforced his well-earned reputation as a spender with no modern peer. He'll own the record deficits and fast-rising debt. And he'll own the U.S. credit-rating downgrade to AA if Standard & Poor's so decides.  

We'd far prefer a bipartisan deal to cut spending and reform entitlements without a tax increase. But if Mr. Obama won't go along, there's no reason Republicans should help him dodge the political consequences by committing debt-limit harakiri.

Essentially, if no deal is possible then McConnell's plan lets Obama take the fall for raising the debt ceiling without cuts (a surefire way to look like an economic dunce), absolve the Republicans of charges of being obstinate and causing economic turmoil, and salvage the economy in the short-run in order to fight the entitlement battle another day.  The alternatives?  Sign on to the Democrat's plan or allow the economy to run off a cliff.  If a deal with the Democrats truly isn't possible, the McConnell plan seems like a healthy way out.

A Taxing Mentality

Tensions have been mounting as the White House and congressional leaders have failed to agree on a package to resolve the impending debt-limit crisis.  Republican leaders, including House Speaker John Boehner, House Majority Leader Eric Cantor, Senate Minority Leader Mitch McConnell and Senate Minority Whip Jon Kyl, have all resolutely stood firm in opposing any tax increases as part of a deal to raise the debt-limit.

The GOP leadership is absolutely correct in their obstinacy.  While ultimately some short-run tax increases may be necessary to pay-off the monumental heap of debt this country has imprudently managed to accumulate, the Democrats seemingly do not understand the need to spend less than the federal government takes in.  Until the Democrats show an understanding of what taxes are for - namely to pay for the essential services required by this country - no tax increases should be considered.

Mona Charen highlights the backwards thinking of the left in an editorial at NRO.

It is becoming a verbal tic — the tendency on the part of the president to tell wealthy Americans (“people like me,” he’s always careful to add) that they have made more than enough money and will have to cough up more of it for the government. Speaking for himself on July 11, the president offered that he had “hundreds of thousands of dollars that I don’t need.” 

The president is of course welcome to donate as much of his extra money as he likes to the federal treasury. He knows Timothy Geithner personally and can probably get a guarantee that his check will be cashed without delay. And since the president is so ready to impute unpleasant motives (like greed) to those who oppose tax increases, perhaps we should impute some sort of moral failing to him for not having thus far contributed his spare change to the government.

The government should never be in a position to determine who has "enough" and thus claim a moral right to take "excess" from an individual.  The government's place is to provide a set of essential services - military, police force, infrastructure, and arguably some minimal safety net (to minimize social disruption).  The need for taxes should be based not on some arbitrary definition of "enough" but on the predetermined needs of the state to properly function.

The Democrats' reliance on the notions that the government can take because people have to much and that the government should provide because people want, shows a flagrant disregard for the purpose of government and taxes.  Tax reform may be necessary (loopholes should be closed), but it cannot succeed (and shouldn't be part of a "grand bargain") until this country's approach to spending and taxes is reevaluated.

The Escape Clause

In light of today’s meeting between congressional leaders and the White House over the debt ceiling and entitlement cuts, two Republican senators have voiced strong support for a balanced budget amendment. Writing in the Wall Street Journal, Senators Olympia Snowe (R-ME) and Jim DeMint (R-SC) state that:

A constitutional amendment to balance the budget is imperative if we are to provide continuity of fiscal responsibility, and ensure we never return to the recklessness of the past and present. It's time Congress passed the amendment and gave the states—and "We the People"—their say.

The senators’ argument not only has wide support amongst the base and Republican politicians; all 47 GOP senators have endorsed such an amendment; but is sound and well articulated. The irresponsibility of continuous spending beyond our means is ruinous for the economic future of the United States. As Snowe and DeMint argue, “the only way to compel lawmakers to maintain their [fiscal] responsibility forever is a balanced budget amendment to the Constitution.”

However while the merits of such an amendment are clear to nearly all on the right and the more sensible on the left, there is at least one potential drawback that needs to be considered in the language of any acceptable proposal. While in nearly all instances there really is no reason to maintain an imbalanced budget, there are a few possible exceptions to the rule. Any balanced budget amendment must include an escape clause in order to prevent hamstringing future leaders (or daresay lead to a repeal of this amendment).

The most obvious exception is the case of major war or national catastrophe. It would be extremely difficult for any country to wage a large scale war, like WWI or WWII, without resorting to debt. Not only would such a restriction be impractical, but it would arguably be immoral to prevent our leaders from taking necessary measures to protect the country.

Concomitantly, there is an argument to be made that the costs of such a war (WWIII) should be spread over multiple years, if not multiple generations. After all, the sacrifices of those who fought in WWII were not just for the benefit of their generation but their progeny as well. It may be impossible for future generations to shoulder past sacrifices in terms of lives; however, it is possible to spread the financial costs. Utilization of debt is a prime tool to balance the costs of such conflicts over multiple years and generations.

Obviously, such instances are exceptionally rare and thus the use of an “escape clause” would only be warranted under extreme circumstances. Nevertheless, the point remains that debt or even a deficit is not always a bad thing. In certain other instances such as significant national projects (how to define the worthy ones is a tough issue) and severe economic decline, deficit spending might have beneficial uses. Just like the responsible use of debt by the individual – a homeowner who takes on a mortgage or a student who takes out loans to pay for college – there are instances where government debt is acceptable, even beneficial.

Debt isn’t intrinsically bad. The excessive abuse of it is the problem. Funding programs (and entitlements) that the government should not even be involved in is bad. The current mentality of spending more than we produce on a yearly basis even goes beyond the Keynesian economics it purports to be based on (Keynes argued for deficit spending during economic downturns with surpluses in upturns, not deficit spending every year). Such a mentality needs to be eradicated and the balanced budget amendment is a fabulous way to do so. Politicians should just be careful that in their haste to solve a serious problem they don’t create a new one by failing to consider the potential benefits of debt. It is a shame to throw the baby out with the bathwater.

It is the Entitlements, Stupid!

Unsustainable public entitlements seem to be the most talked about secret in the nation.  There does not appear to be a pundit out there who has not addressed the necessity for cuts in or fixes of the entitlement system.  Europe has started facing down this monster while US states (who have to balance their budgets) have begun the reform process.  Yet, strangely the federal government has done little to address the nation's budgetary mess.

In today's Wall Street Journal, Charles Koch wrote a poignant editorial about the need to fix America's fiscal situation.  He called on the government to tackle the overwhelming burden of the nation's entitlement system.

In spite of looming bankruptcy, President Obama and many in Congress have tiptoed around the issue of overspending by suggesting relatively minor cuts in mostly discretionary items. There have been few serious proposals for necessary cuts in military and entitlement programs, even though these account for about three-fourths of all federal spending.

His criticism is not solely reserved for the Democrats.  The GOP is equally culpable in the mismanagement of the national finances.  Koch attacks the concept of crony capitalism, which is seemingly endemic on both sides of the aisle.  Democrats and Republicans alike operate under a system that has utterly failed to face reality.  Koch argues that,

Crony capitalism is much easier than competing in an open market. But it erodes our overall standard of living and stifles entrepreneurs by rewarding the politically favored rather than those who provide what consumers want.

The purpose of business is to efficiently convert resources into products and services that make people's lives better. Businesses that fail to do so should be allowed to go bankrupt rather than be bailed out.
...
Our elected officials would do well to remember that the most prosperous countries are those that allow consumers—not governments—to direct the use of resources. Allowing the government to pick winners and losers hurts almost everyone, especially our poorest citizens.

Politicians, on both sides of the aisle, should heed these warnings.  Koch makes a powerful - and true - argument.  If American politicians, for fear of electoral retribution, fail to force tough choices on America, everyone will pay the price.  The federal government needs a serious dose of reform.  It needs to be smaller, more efficient, and supportive of free competitive markets.  Time to get started before it is too late.

The Budget, Entitlements, and Government

In today's Washington Post, Robert Samuelson wrote a poignant editorial on the much needed buget cuts.  He argues that government benefits, once lavished upon the electorate, are largely (politically) unremovable, becoming in the eyes of the people "property rights."  Coupled with the desire to minimize taxes this creates an untenable budgetary mess.  Samuelson correctly argues that partisan interests - whether farm lobbies, the elderly, or others receiving undue government support - should recognize a moral need for change and put aside their self-interest for the national interest.  In other words, he calls for a rewriting of the social contract.

The thrust of the argument is on the areas of the welfare state (or benefit state to construct it more widely in order to include agricultural subsidies and the like) that need to be slashed; however, he does tepidly venture into the more philosophical realm of the role of the state when he discusses the defense budget.  Samuelson argues that cuts to defense should not be treated the same as cuts in other areas of the national budget because "[n]ational security is government's first job."  He, unfortunately, does not take this to the next level, namely by opening a discussion on what the proper role of government is.  Government's role within society has expanded enormously and if America is to not only solve its budgetary issues but also resolve the government's wayward drift, the people need to pin down what, philosophically speaking, the purpose of government is.

Welfare Moms and Bailout Banks

Unfortunately, it has become far too acceptable, in modern American society, to expect government handouts. Through a long history of increased government assistance and programs, society has developed an inflated notion of entitlement. This problem is clearly seen in two nearly dichotomous phenomena in the news today- Nadya Suleman (the invitro-welfare mother of 14) and the economic bailout. In both instances, we see the excess of government “entitlements” run rampant.

The key parallel is that in both instances the government is serving as an enabler of poor behavior. By serving as an overinflated safety net, the government is encouraging future individuals or groups to behave in a similar fashion. Clearly, Suleman has seen no incentive to stop having children despite her past (and current) status of being on welfare (which she ironically denies is welfare). Likewise, what incentives will future investment bankers have to avoid taking on too much risk (or more properly, mispricing risk)? The government’s actions today essentially limit the downside risk an individual or group can face. This risk assessment is naturally a huge factor when an individual or group is making a decision. If they foresee less risk, because they know the government will bail them out, they will be more willing to make risky, poor decisions. This in turn spirals downward, increasing the role of the government and negating the individual’s personal responsibility.

Do not make the conclusion that I am calling for a complete end to social welfare or that I believe the government should completely be laissez-faire in dealing with the economic crisis. I don’t believe either. What I do believe is that government policies should be more principle-based (rather than rules-based). This is particularly true in the case of welfare. Abuse of the system should be punished harshly; thereby, precluding people from taking advantage. Welfare should only be available to those who absolutely need it AND who are taking steps not to need it any more. Abusers such as Suleman should not only be precluded from collecting any form of government aid but should be punished for their abuse. It would be worthwhile to consider charging her with child abuse (in regards to her current children and for purposefully and irresponsibly bringing 8 new children into the world when she does not have the means to support them). [The doctor who performed the procedure should at a minimum have a moral, if not a legal responsibility, not to perform elective procedures that will become a burden on the state- but this is a separate discussion]. Government resources should be used for the truly needy, in a more discretionary fashion that allows greater scrutiny in distinguishing between abusers and the truly disadvantaged.

Likewise, the economic bailout needs to be focused in more general fashions. I do believe that the government has a role to play in righting the economy. But, it does not mean just throwing away money to failing industries. The auto industry is a prime example. Giving a largely unrepentant, inflexible, and poorly structured industry a vast some of money only incentivizes it to continue its broken ways. What reason would GM have to make radical new changes if it gets money when it messes up? Furthermore, by supporting the old dinosaurs we squash the new upstart innovators that may have better and more efficient products and methodologies (and those we don’t squash will just set up shop in other countries). There will certainly be costs if the auto industry fails- but a few short term costs are much better if they enable a long term fix. We suffer more harm by building on a broken foundation rather than just tearing down the building and starting anew. (This is partially our own fault by having policies which encourage anticompetitive industries that are too heavily reliant on two or three companies).

The bottom line is that the government has to step back- let people and corporate entities fully assess the risk of a situation without the promise of bailout from Uncle Sam. If each actor knows they might have to fend for themselves, they’ll take the appropriate responsibility to make sure they are heading down the right path. Maybe it is simply tough love- after all, we would all ridicule a parent for doing their child’s homework because the child struggles. Sometimes failure is necessary to ensure that individuals learn the correct way to act, and thereby prevent future failure.