Monday, September 14, 2009

Addressing uncontrolled federal debt growth

Per Andrew Sullivan, there's a recent AEI piece by John Steele Gordon addressing the uncontrolled growth of federal debt. Sullivan notes that it's (of course) too easy on the G.W. Bush Administration, to which I'd add that it also misconceives the core problem and offers dubious solutions. but at least it's a generally good faith effort, albeit from a perspective that conservative readers (actual ones, not Teabaggers who mind debt only during Democratic administrations) will find more compatible than liberal ones.

While I welcome Gordon's input here, I view it as having basic conceptual problems that have nothing to do with liberal vs. conservative.

First, he offers as his Proposal # 1 resurrection of a constitutionally permissible form of the line item veto. This is naive, and further analysis would be needed to ascertain whether it would raise or lower spending growth (as I explain here). People tend to think about the line item veto statically: Congress spends $X, then the president can only reduce spending by knocking some stuff out. But legislation is a dynamic process. The line item veto shifts power towards the president, and will be used to further his interests or policy agenda relative to that of the Congress. So the question is: How will this likely affect total spending? In general, Congress tends to like penny ante stuff more than the president does (goodies for particular districts or interest groups). But presidents like really big initiatives more. Thus, e.g., if the line item veto existed today it would offer Obama additional leverage to lobby members of Congress to support his health care legislation ("give me your vote or I'll knock out the appropriations for your district").

Gordon's second idea is to have an independent accounting board scoring new programs (a la the Fed, except that here it's just scoring, not substantive policy actions). Fine with me, but don't expect much, I would say. No reason for Congress or the president to care much what these folks say. Plus, to what degree would the nominal independence actually work out in practice? The incentive the parties have to preserve Fed independence (fear that, if they exercise direct control, they'll screw up AND take the blame for everything) really doesn't apply here. What sorts of people do you think George W. Bush would have appointed to this commission, not to single him out as the only sinner, if he thought it would matter substantively to policymaking in the slightest?

Gordon's third idea is to limit total spending by Congress so it could only grow with the population. Even assuming the underlying normative predicate, which is of course controversial in right versus left terms about the optimal and politically likely scale of government, it's a fatally naive implementation of the idea that government growth should be slowed. As I explain in my recent book on fiscal language and approaching fiscal default (link, once again, is here), the term "spending" is formalistic and not meaningful, e.g., consider tax expenditures or regulatory mandates. Dollars formally counted has "spent" has very little relationship to the true size of government, i.e., its effect on allocation and distribution relative to some agreed-upon (if problematic) "minimal government" baseline.

1 comment:

Phil Hodgen said...

Alas, government spending increases for much the same reason that entropy occurs in the physical world -- it is the natural course of things.

The countervailing force to government spending run amok is politicians behaving like grown-ups. In the political arena that is a bit too much to expect.

The attempts at control are all tacit admissions that the political crowd behaves as to money as a drunk behaves as to whiskey. "Yeah, lock the liquor cabinet!" says the drunk, except he keeps a spare key in his pocket. :-)

Yet we can't give up on the problem of money and government. You're right -- it isn't a left/right thing. It's a matter of knowing that ultimately we must behave responsibly. Sometimes even if it is futile!

I enjoy reading your posts. First comment here.