Budget Busting

Megan McArdle

The Atlantic

Stan Collender has some deservedly bitter words for the Republicans in Nassau County whose fiscal irresponsibility is putting a rich county into quasi-receivership. He draws some lessons from the situation, not the least of which is that the tea parties have to be as serious about cutting spending as they are about cutting taxes . . . and so far, they haven't been very effective at either advocating, or achieving, the former.

1. A promise to cut taxes by a candidate for office is not the same as a promise to do what's necessary to balance the budget.

2. Even in the face of conclusive evidence that tax cuts don't automatically pay for themselves and will lead to more government borrowing, GOP office holders will continue to insist both that the tax cuts are the right policy and that they are in favor of lower deficits.

3. As has been proven time after time, "Starve the Beast" doesn't work if the assumption is that higher deficits will lead to spending cuts. This is true even when, as in this case, a Republican is in the position of power and could propose the spending cuts.

4. The GOP claim that it is the political party of fiscal responsibility is simply not true.

5. The existence of tea party types does not change #4.

6. Voters don't like spending cuts as much as they don't like tax increases.

However, I think that Collender's post makes it sound like this is some sort of unique vice of the GOP, which is far from the case. Notice that the Democrats have also proved a lot more effective at delivering goodies than at delivering fiscal responsibility, at both state and national levels--the states in the worst shape during this crisis are blue, not red. Yes, they faced an opposition who bitterly opposed any attempt to balance budgets the way they'd promised. I'm sure the Republicans in Nassau would say the same thing.

I agree that "starve the beast" has proven a miserable failure. I'd also say that the Democrats have their own version of this: the belief that any broad-based program, once enacted, will prove virtually impossible to cut. You heard this repeated over and over during the health care fight: just pass it, because once it's passed, they won't be able to repeal it.

I view both parties right now as engaged in a colossal game of chicken. Everyone knows that eventually, we are going to have to do something about the budget deficit. So everyone wants to pass legislation that will be politically toxic to undo. The idea seems to be that when the moment of truth finally arrives, the other side will have to make more concessions.

I assume that at some level, Republicans understand that cutting taxes will make it that much more wrenching when we finally have to cut the deficit. I assume that at some level, Democrats knew that passing the health care bill would make it harder to balance the budget, because we used up the easiest, most obvious tax increases and spending cuts on expanding health care coverage, instead of using them to bring revenues and spending into roughly the same ballpark. But I think they view this as a way to improve their initial position in the final showdown, meaning that overall, we'll end up with [lower taxes/higher spending] than we would if they just left well enough alone.

Despite Ross Douthat's optimism, I am very much afraid that this we are headed for a terrible crash. Game theorists tell us that the way to win a game of chicken is to make a highly credible committment: rip off the steering wheel, and throw it out the window. They do not tell us what to do once you have thrown it--only to realize, in horror, that the guy in the other car has just done the same thing.