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Tuesday, March 06, 2012

The Real Moral Problem

Ezra Klein points out that we shouldn't confuse structural and cyclical debt accumulations. Saying that recent changes in debt reflect a moral issue when it is being driven by the recession is very misleading:

Deficits don’t reflect a crisis of American character, by Ezra Klein: There are many good points in David Brooks’s encomium to the life and work of James Q. Wilson, but permit me a quick quibble.
”Every generation has an incentive to spend on itself, but none ran up huge deficits until the current one,” Brooks writes. His point is that the growing federal debt is superficially attributable to higher spending and, more profoundly, is a reflection of changes in the national character. But that’s not what the numbers show. Rather, they show that the growing federal debt is attributable to tax cuts that began in the 1980s and, in the future, to the aging of the population and the ceaseless advance of medical technology.
Current deficits reflect the aftermath of a generational financial crisis. They show an economy saving itself, not a generation spending on itself. ... For the last two decades, debt has been around what it was in the immediate run-up to the crisis. So there’s been no major change to structural deficits in the last 20 years, and thus, no evident change in the national character. ...
So perhaps a more accurate way to make Brooks’s point is that every generation has an incentive to cut taxes on itself, but none ran up huge deficits doing so until Ronald Reagan. But that was a previous generation. Then this generation did the same thing under George W. Bush...

Why should we care about the misleading rhetoric? Because it gives ammunition to those who have had social programs in their sites for decades -- it gives them the arguments they are looking for to make severe cuts in government programs. And centrist, right-leaning Democrats will go along in the interest of solving this "great problem" that we face:

Grand bargain, redux?, by Steve Benen: Last year, as part of the fiasco surrounding Republicans' debt-ceiling hostage crisis, President Obama offered House Speaker John Boehner (R) an overly-generous "grand bargain." Though some of the details are murky, by all accounts, the Democratic president offered Republicans a $4 trillion deal on debt reduction, which included GOP-friendly entitlement "reforms," in exchange for modest increases in tax revenue.

Presented with a ridiculously sweet deal on what is ostensibly the party's top priority, Republicans rejected the offer out of hand. It would have required a fairly small concession on taxes, which GOP lawmakers simply were unwilling to make. It was, in retrospect, the best possible outcome for Obama -- he offered far too much and was poised to get far too little.

Regardless, the Republican opposition to the compromise scuttled the grand bargain, seemingly for the indefinite future. Oddly enough, there's renewed scuttlebutt eight months later.

A small, bipartisan group of lawmakers in both the House and Senate are secretly drafting deficit grand bargain legislation that cuts entitlements and raises new revenue.

Sources said that the task of actually writing the bills is well underway, but core participants in the regular meetings do not yet know when the bills can be unveiled. ...

You'll notice those paragraphs mention three conservative Republicans and one conservative Democrat as participating in the talks. I'd add that there's no evidence of any progressive Democrats playing any role whatsoever in these negotiations.

The result, if there is a result, will almost certainly be a bargain that's very favorable to Republicans. ...

If there's a moral issue here, it's the Republicans using misleading rhetoric about the effects of tax cuts on growth, trickle down economics, tax cuts paying for themselves, and so on to obscure what, at its essence, is a large transfer of income to those at the top of the income distribution.

And they're still trying to mislead us to hide the true agenda:

News Is That Romney's Advisors Are Trying to Keep the Campaign from Claiming That "Dynamic Scoring" Through Faster Growth Will Pay for More than 1/3 of the Tax Cuts..., by Brad Delong

Why isn't Brooks complaining about the morality of this? There's no evidence to support this claim (or similar claims made by Romney and others during the campaign), as his advisors know full well. It's simply a means to cover the fact that the benefits he wants to give to the rich -- more tax cuts -- will blow a hole in the budget. Again, where's the complaints about the morality of doing this? Romney's far, far from alone in making these misleading, dishonest claims, yet Brooks wants to blame a cyclical budget problem and budget problem arising from the Bush tax cuts on the morals of the general population? How convenient.

And isn't empathy a desirable moral trait, one that someone like Brooks would endorse? How about self-pity, is that an attractive moral trait? What about selfishness to the extent of demanding tax cuts for yourself that are likely to come at the expense of important programs for the poor? How moral is that?:

Fanning the Flames of Class Warfare, by Bruce Bartlett, Commentary, Ny Times: A curious phenomenon occurs during every economic crisis – the rich whine that they are the ones who are suffering most. While obviously one’s capacity to suffer under any circumstances is subjective, when we hear that the very well-to-do ... seek pity, it comes across as callous and clueless.
That is especially so when the political agents of the rich are demanding still more tax cuts for them while doing their best to slash spending for programs that aid the poor. ...
But they should have the good grace not to ask for sympathy from those who are unemployed, barely have enough to eat or have had their homes repossessed. In particular, the wealthy ought to stop demanding more tax cuts and cuts in spending for programs aiding the poor, as every Republican presidential candidate promises. That’s just repulsive. ...
I’m still waiting for the growth Republicans promised under George W. Bush after they cut the top federal income tax rate to 35 percent from 39.6 percent, the top rate on qualified dividends to 15 percent from 35 percent and the top rate on capital gains to 15 percent from 20 percent. All of these actions significantly lowered taxes for the rich without raising economic growth at all. Why will more tax cuts for these same people do any good now? ...
President Obama is clearly preparing for a debate on the growing inequality of wealth and income. ... I think the Republican nominee is going to have a hard time responding if all he has to say is the rich need more tax cuts to compensate them for all their suffering during the economic crisis.

There are moral issues out there, but they aren't the ones that Brooks and company think they are. Many of the people pointing fingers at the moral failings of others need to take a hard look at their own behavior and how it has enabled the morality that allows the rich to mislead the public about the impact of budget busting, redistributive, hard to see any growth policies that were key in producing the debt problems that we now face.

    Posted by on Tuesday, March 6, 2012 at 10:34 AM in Budget Deficit, Economics, Income Distribution, Politics, Social Insurance, Taxes | Permalink  Comments (47)


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