What Should We Cut?, II

Congress is hard at work slashing and burning our national budget. Or at least the Republicans are. The conservative Republican belief is that government should be slashed to its absolute minimum. Liberals are in perfect agreement that waste, by definition, is wasteful, and should be eliminated. Those two things are not the same.

The current budget crisis was largely brought about by adherence to a conservative belief that The Free Market holds the answer to all things economic. But the crisis is largely a product of the uncontrolled Free Market. The current mess gives radical conservatives the perfect motive for their slash and burn tactics. The real question is whether this slashing will improve things or make them worse.

Republicans claim that budget slashing will create jobs. I fail to see how cutting the budget can do anything but eliminate jobs, just as it did when we tried it in the 1930s, to disastrous effect.

My belief is that slash-and-burn budgeting will fail not only to place the budget back on firm footing, but it will cause long-lasting damage to the economy. We need to do things that will repair the economy by increasing tax revenue, and we need to fix the procedures that caused the problems in the first place.

So the first thing we must understand is what caused the problem in the first place. Fortunately, this is rather easy to understand. Fixing it, not so much.

The major cause of our current economic crisis is the gradual erasure of the rules and regulations that restrained greed in the marketplace. This destruction began with Ronald Reagan, and the fault lies squarely on the shoulders of Republicans. It stems from an incorrect belief that the unrestricted marketplace brings all good, therefore all rules and regulations should be done away with. Unfortunately, an unrestrained marketplace brings infinite greed along with whatever benefit there might be. This will always lead to the kind of situation we have experienced, although the details will vary.

Therefore, the long term solution involves the re-establishment of reasonable market regulations and restrictions. The procedures that the government has established or proposed so far seem like no such thing. More often, they look like they were designed by bankers for benefit of bankers.

The cause of the current budget mess is low tax revenue, not high spending. Contrary to popular belief, the tax burden in the US is considerably lower than most other advanced nations. The reasons for low tax revenue are not hard to understand: low taxes, high unemployment, diminishing wages, tax avoidance by huge corporations, and unfair tax benefits given to the very wealthy. I don’t believe that any effort to pare government to the minimum will address these reasons, as conservative Republicans believe, because cutting government is not intended to address these issues. It is intended only to honor an abstract principle.

If we are to slash, we should ask the following questions:

1. Is this government program the best way to accomplish the goals established for it?

If it is not, the program should be cut completely; if it is, it should stay. I have not heard of an extensive study of any government program that was actually designed to answer this question. The real goal for eliminating programs is to satisfy the conservative principle of least government. This has almost nothing to do with the common wellbeing of citizens or the economic health of the country. It is simply an abstract principle, an item of belief.

I believe that the federal government should perform those tasks that it can do more efficiently than private enterprise or local government can, because the cost per person is by definition lower. More money in our pockets. More often, eliminating a federal program simply throws its duties back to a place where they are done with less efficiency, if at all. At the moment, state governments are in such dire budgetary difficulty that they simply cannot assume any new duty.

2. What will be the actual effect of a particular budget cut on all Americans?

Will it actually eliminate waste and improve the budget? In most cases, I doubt it. What will happen is that the cost will be shifted to a less efficient way to deal with the task, or it will be done very slowly because of reduced personnel (= more unemployment). If it becomes a state problem it is very likely to be unsuccessfully performed in many states, particularly now, with all state budgets in disaster status. If it becomes an individual’s duty, we can be guaranteed that large numbers of people will be unable to afford it. In any case, we will all be worse off.

Our new health care plan is a prime case in point. If the new federal health care program is defunded as Republicans wish, there will be a significant increase in the millions of people who have no health care insurance, leading to a large rise in social ills that everyone pays for. Conservatives might applaud because of adherence to their abstract principle, but in the real world many millions would be worse off.

3. Is there a better way to deal with the budget crisis?

Yes, there is. We are repeating history by failing to remember the lessons of the 1930s, in which repeated budget cutting failed to help. The real problem is insufficient tax revenue, and that has known causes: low taxes, high unemployment and low pay, along with tax avoidance by corporations and the rich. There may be some relatively small benefit to be obtained from slashing the budget, but I doubt it. Any benefit will be offset by still lower tax revenue and higher unemployment, leaving us with a negative net benefit.

High unemployment is best attacked by the federal government, because the federal government alone has the ability to create money to use as needed. This would be bad as permanent policy because it tends to increase debt, but for the short term it is one of the few things that we know works.

The most immediately effective program would be hiring people to perform important tasks not being done today. A ready example is repair and maintenance of infrastructure. Totally unsexy, but there are some three dozen federal structures in San Francisco alone that need work to prevent their collapse, which will bring us considerable expense if they aren’t tended to. There are dozens of ways the federal government could provide relief to state and local governments by paying new workers for jobs not now being done, for such things as park and transportation maintenance. In the 1930s, even artists contributed, and we enjoy some wonderful art from those days, as well as a number of major infrastructure projects. Such financial programs are not meant to be permanent, and it is possible to design the programs to allow for for their gradual phasing out as economic goals are met.

Modernization of our technical capabilities would help, but we are limited in how well we can compete on the international market because other modern nations all have some sort of national health care. Their industry does not have that expense, thus making them more competitive. Republicans want to eliminate all health care except individual care. This might increase industrial competitiveness, but would be a certain disaster for most families, and increase the rolls of uninsured significantly, leaving us once again with a negative net benefit.

The other issue of employment is poor pay, which results in reduced tax revenue. This can be overcome by the institution of Living Wage programs. Living Wage is not minimum wage. Living Wage requires employers to pay adequate wages so that full time work provides income sufficient to satisfy all basic needs, such as housing, food, health care, and transportation. San Francisco has a Living Wage plan, as does Australia. Living Wage puts more money in the market, more tax revenue in the treasury, and changes many of the poor from a liability to an asset.

We are going about trying to solve our budget crisis all wrong. We are slashing the budget solely to honor the conservative goal of minimum government. The most likely result will be to put us in an economic funk that will last until we remember what we already know.

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