The basic challenge of voting is to consider the costs and benefits of totals; consider the costs and benefits of details; and come up with a mathematically consistent set of details and totals with acceptable overall costs and benefits.
People will disagree greatly about the balance. But any individual can come up with a consistent package far more easily than a group can. The difference between individual and social choice gives budget talk its bizarre, self-righteous tone.
Virtually everyone can say that the deficit “should” be lower because virtually everyone can think of some current spending that they do not value, or someone else who should be paying more taxes. So Larry Haas and Bob Greenstein and Mike Tanner and Brian Riedl and even I can say the deficit is higher than it “should” be, and that we make our judgment based on both our values about totals (such as beliefs about their economic effects) and about the details (the good or harm done by programs or taxes).
But when we combine our consistent preferences through voting, the result can be quite inconsistent. This is a key point in a classic piece by the economist Anthony Downs. The package of government programs always includes “at least one act which any given voter opposes.” Actually it will contain many more; and so any voter can think of ways to improve budget totals: urban consumers cutting farm subsidies, some liberals cutting the military, farmers cutting mass transit, conservatives cutting “welfare,” etc.
The result is easier to see by imagining a condo association. Let’s say there are ten units, and monthly payments of $225, so annual revenues total $27,000. Let’s say there are ten expenditures, each of $3,000 – landscaping, cleaning public spaces, utilities for public spaces, towels and cleanup for the exercise room, heating and cleaning the pool – whatever. So spending is $30,000, and revenues are $27,000, and a deficit of $3,000.
The simple approach would be to raise the fees to $250 per month. But Mr. Simpson may say, “wait a minute, I don’t swim, let’s cut out spending for the pool.” He is perfectly consistent if he doesn’t want to raise the fee – but the other nine owners like to swim, so disagree. Mr. Bowles may say, “I’m allergic to grass, let’s pave the yard and then we won’t have to pay to maintain it.” But the other nine object because they like having grass. Mr. Cote thinks people can bring their own towels to the exercise room, so they should cut that instead of raising the fee. The other nine think that is a bad idea.
In this extreme example, all ten owners object to raising the fee; all ten owners are rational because their own preferences add up; but 90 percent of the group also opposes any particular cut! So all can self-righteously say, “we shouldn’t have a deficit,” and “we shouldn’t raise the fees” and say the deficit is a scandal – but it doesn’t get fixed.
What happens with the federal budget is much the same: only minorities support any particular spending cuts or tax hikes, but everyone agrees that the deficit is too high. And this allows everyone to think the political system is being irresponsible, without having to confront the fact that maybe there are good reasons why majorities oppose most of what is proposed to reduce the deficit.
In this context, things like the “National Commission on Fiscal Responsibility and Reform” are sold on one set of grounds but, if they work at all, can only work in a less attractive way.
The Commission is presented as a way to encourage compromise, by making people pay more attention to the totals and sacrifice their selfish preferences about details to the public interest in the totals. Let’s ignore for the moment the fact that, for example, privatizing some of Social Security would serve very specific interests of some specific budget hawks. Let’s also ignore the reasons why parts of the budget may in fact represent very broad interests, and more clearly and accurately than the often dubious economic and ideological assessments of budget totals.
Consider only how the Commission approach is likely to work. The recent exchange among Stan Collender, Larry Haas, and George Hager made some useful points – though it unfortunately also promoted the “tough choices” view. One of the things it left out, however, was the fact that deficit reduction packages generally have not been “balanced,” in which all sides “give equally.” The two big tax and entitlement packages, in 1990 and 1993, both tilted “liberal.” The mid-1990s restraint on discretionary spending was made possible by having a quite conservative majority in the House, which was happy to cut domestic programs. Even the 1982 and 1984 packages, which were not particularly ideological, targeted particular interest groups (particularly business taxes and hospitals in 1982; financial firms in 1984). Deficit reduction packages are never “fair”; they always target minorities.
Therefore anyone who believes the Commission will “fix the deficit” ought to believe that it will somehow clobber one side. Looking at its membership, it appears far more likely to settle on slashing Social Security, and perhaps health care programs and other domestic spending, than on any other approach. I can see something close to 14 votes for that; I cannot see anything resembling 14 votes for much else. The question then becomes whether President Obama will sell out his own party in the cause of deficit reduction.
The reason so many liberals are scared of the commission is, it is easy to imagine Obama doing just that. The problem is not only that he has chosen members of the commission in a way that might enable the conservative approach to get the votes. It is also that he may have set up the situation to put himself under the same kind of pressure that George H.W. Bush put on himself in the budget negotiations of 1990. Having promised to do something, and created a situation where he could not act without going back on his “No New Taxes” pledge, Bush eventually broke his pledge. And the negotiating situation in 1990 was not nearly as one-sided as the situation within the Commission given its composition.
The Commission, then, is set up as a “solution” to a problem that has been wrongly defined. The problem is not a “lack of courage” among our politicians. The problem is that budget choices really are “tough” on the merits. Budget talk ignores this by privileging dubious theories about the totals over careful consideration of the details. It promotes macho over analysis, and emphasizes some costs and benefits over others. I do not consider any of those patterns rational.
If the Commission reduces the deficit, it will do so because it is structured to favor some interests over others. Nobody should imagine that, if the Commission produces and helps push through a deficit reduction package, this will be because it made “tough choices” to favor the “public interest” over “special interests.” It just will have short-circuited the basic collective choice problem by favoring some people over others in the choice process. It is set up to turn supporters of Social Security and Medicare into a minority, even though they are clear majorities of the voters. We will see if the design succeeds.
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Joseph White is Director of the Center for Policy Studies at Case Western Reserve University.