Fiscal Conservatism
As mentioned in the January, 2010 article in the Party of Common Sense, Senator Kennedy's seat in consistently Democratic Massachusetts was won in an upset by Republican challenger, Brown. Many are pointing to that event, combined with the loss of the governorships in New Jersey and Virginia, and a persistent and vocal Tea Party to say the problem of the growing US deficit that has been ignored too long needs to be taken seriously by politicians of both parties. It should be noted that we at the Party of Common Sense read these events as being anti-incumbency, not necessarily Republican victories or Democratic defeats. These votes should be read as a shot across the bow of both Republicans and Democrats to warn both sides that voters are losing patience with the lack of progress, any progress, in Washington.
The Tea Party movement is a group that claims to be part of neither party, but rather loosely knit series of grass roots local people fed-up with Washington. Although the issues espoused by members are varied and many, for the most part they are Conservative issues are most closely aligned with the Republicans. The most prominent issue seems to be the mounting debt and current budget deficit. In theory, the TEA part of the nomenclature stands for the rhetorical question: "Taxed Enough Already?" Assuming this movement represents real, actual anger at the mounting debt and not just another front, a cudgel being used by the Republican Party to attack Democrats, then politicians must take seriously this problem. At the Party of Common Sense, we too are concerned about deficit spending, but also believe in Keynesian economics. When the other two big drivers of the economy, business and the consumer spending wither, it is the responsibility of the government to step up and spend to stimulate the economy.1 As Keynesians, we believe temporarily running deficits in an effort to keep our economy from teetering into depression is still a responsible action. However, it has become clear that spending in bad times must be counterbalanced with savings in good times - and in the last several decades neither party has been able to show much constraint.
For years the Republicans have held the mantle of fiscal conservatism. One of Ronald Reagan's cornerstone issues was "smaller government". In his first inaugural address in 1981, President Reagan famously stated, "government is not the solution to our problem; government is the problem." All the while the Republicans have derisively pasted the label "tax and spend" on the Democrats. These labels have stuck even though the Bush years doubled the deficit, cutting taxes and increasing spending including the creation of a huge new entitlement program - the Drug Prescription Program, while Bill Clinton was the last President to see a budget surplus. Regardless who claims the high ground on the issue, the fact is that our national debt is $12.3 trillion, with President Obama's budget proposal would add another $1.6 trillion in debt to the pile.
Tackling the problem of balancing the budget is a difficult one. Simple math shows that solving the deficit is not a matter of simply cutting programs, nor can we simply raise taxes, rather it will take a combination of both, and perhaps even a hard look at entitlement programs. To complicate matters, surveys have shown that people want to see a balanced budget but don't want their taxes raised or their programs cut. Congressmen and Congresswomen, to whom our founding fathers handed the power of the purse and therefore controls the budget, find it difficult in today's economic climate to have to return to their constituencies and report that a program has been cut or a new tax instituted. This reluctance to make the tough choices and live with the sacrifices is one reason that we at the Party of Common Sense are supportive of the idea of a Debt Commission. The proposed commission would include eight Republicans and ten Democrats (two appointed by Obama), and would take several months to study the budget problem. After the midterm election, the commission would vote on a reform package, and if it received 14 votes, the measure would go to Congress for an automatic up-or-down vote. There would be no amendments to protect parochial pet projects and every Congressman and Congresswomen would have to be on record as to whether they were for or against trying to balance the budget.
On Saturday, January 23, 2010, Obama stated "The only way to solve our long-term fiscal challenge is to solve it together - Democrats and Republicans. That’s why I strongly support legislation currently under consideration to create a bipartisan, fiscal commission to come up with a set of solutions to tackle our nation's fiscal challenges - and call on Senators from both parties to vote for the creation of a statutory, bipartisan fiscal commission." Three days after Obama stated his explicit support for the commission, on Tuesday, January 26th, the Senate voted against the Deficit Reduction Commission.
After months of pushing for the idea of the Debt Commission, seven Republican cosponsors of the bill voted against it. They were Senators Robert Bennet (R-Utah), Sam Brownback (R-Kansas), Mike Crapo (R-Idaho), John Ensign (R-Nevada), Kay Bailey Hutchison (R-Texas), James Inhofe (R-Oklahoma) and John McCain (R-Arizona). An eighth co-sponsor, Sen. Lisa Murkowski (R-Alaska) didn't vote. Even Senate minority leader Mitch McConnell, who has been on the record for months of backing the committee voted against it. The legislation failed to pass with a filibuster-proof majority by seven votes.
There are those that see politics as a blood sport. A zero sum game, where if I win, you lose and if you win, I lose. These are the people that don't care about what's right or wrong for America, just that the other side loses. Republicans championed the idea, and when Obama finally supported the idea, they voted against it. Petty politics at it's worse. They care more about Obama failing then they do about tacking the debt or solving America's problems. If we at the Party of Common Sense are reading the political tea leaves correctly [pun intended], and the lack of progress, especially with the debt is a real populist concern, then it is our sincere hope that activists on both sides see this petty vindictiveness and call to account their actions by voting these Senators out of office.
We do have concern that these activists are truly concerned about the national debt. If they were, reforming healthcare should be one of the number one priorities to these protestors - yet the messages and signs at the rallies are decidedly against healthcare reform. It is our assumption that they issue has not been clearly described as a fiscal, not necessarily moral, imperative to fix healthcare.
There are three main issues with healthcare, the three "C"s: Cost, Care, and Coverage. Under cost, as The Party of Common Sense has pointed out before, Americans spend almost $8,000 per man, women and child for healthcare, more than twice what other industrialized nations do. Although most people don't write a check in that amount, we pay for it through taxes (Medicare, Medicaid, and the Veteran's Administration), through lower wages as employer dollars are redirected to healthcare costs, and through direct payments made by individuals. Furthermore, with this excessive spending one would think we have the best healthcare in world, right? Except that in almost every measurable category, including longevity of life, America is not number one. And finally we are the only industrial country in the world that doesn't provide universal coverage. Beyond the moral imperative, it is fiscally imperative too. What is often missed is that in an odd way, we do have universal coverage. If someone is in an accident, and an ambulance is called and they are taken to a hospital, by law they cannot be released until they are stabilized. So we have a catastrophic care safety net, which covers individuals with their most costly care, but fail to provide the low dollar preventive medicine that could lower costs. So, there is a subset of our society who makes the calculation. They can forgo health insurance, knowing if something catastrophic occurs – they will get the care they need. And when these people can't pay, it's those with insurance that do pay, in the form of higher costs. It's imperative to bring these outliers into the system to help control costs.
Let's say for minute, that we were able to reduce healthcare costs by $3,000 per person - which would still put us higher than average industrialized nation. This wouldn't be easy, as we’ve seen with the healthcare debates. However, there have been some promising and proven ideas that can help. For example: concentrating on outcome per patient and not revenue per patient. Assuming we were able to maintain or even improve the quality of care (other countries can do it, why can't we?), while lowering costs, this would save approximately $1 trillion. Think about it. It could go a long way to fixing our budget deficit. Or it could fund new investment in American businesses to get people back to work. Or, for those on the political right, it could fund Bush's tax cuts four times over. In addition, this saving represents about 6.5% of our GDP. That means for every service and product sold, there is an implicit additional cost of 6.5%. The healthcare problem is not only a drain on America’s economy; it is also directly affecting American competitiveness abroad and costing America jobs.
On another note in regards to our economic situation, there are those libertarians that would prefer to see no government (other than common defense), however, I think most people agree that some level of government is preferable to none. For example, having food inspectors ensuring our food supply proactively, rather than trying to enforce the laws reactively, is preferable to risking you and your family's lives every time you pick up a pound of hamburger meat. Reagan's idea was to "starve the beast". The hope was to reduce taxes, lowering the government income, and therefore force across the board cuts. When cuts came, the hope was the fat would be eliminated, thereby making government more effective. However, we at the Party of Common Sense believe this to be backwards - that rather than cutting budget to become more efficient, we should become more efficient to reduce cost. Take your local Department of Motor Vehicles. If there is a 10% cut in their budget, their reaction is to reduce staff and perhaps close branches - negatively impacting the citizens they are trying to serve. We believe a better approach is to streamline the driver's license process, thereby creating savings without negatively impacting service. We understand the argument that without the initial budget cut, there is little incentive to streamline service, but there is one area which provides low hanging fruit - waste, fraud and abuse.
President Obama has repeatability spoken out for creating greater transparency in government. With the stimulus bill he offer a website,
We understand the knee jerk reaction when faced with criticism is a defensive one, but it is our hope that the Obama administration embraces the criticism, encourages it, and fixes the problems. And that they continue to fulfill their pledge for greater transparency in government. If this does occur, we can foresee a day where a concerned citizen could look up on the web and ask themselves how an often closed storefront medical office could possibly be doing $10m in business? Likewise, scholars could take the same Medicaid and Medicare and analyze it for trends, anomalies, and ask themselves how could spending be improved?
We at the Party of Common Sense bemoan the loss of civility in politics. Our politicians lost the ability to see the forest from the trees and no longer serve the people - rather bow to the special interests, the corporations, and the political king makers in the all mighty quests to keep their jobs. Embracing short sighted sound bites and vicious political attacks both parties are more concerned about tearing the other side down rather than accomplishing something. We would rather be elected for what we've done, not for being less bad than the other. While they congratulate each other on each petty political victory and stroke their own egos, it's all Americans in the USS America that are slowly drowning in sea of red ink.
1 For an entertaining but enlightening explanation of the differences between Hayek vs. Keynes watch the following video.
The economic theory of F.A. Hayek and the Chicago School of Economics states that low interest rates are the problem which created the recession and continuing to make cheap money available only increases the problem. John Maynard Keynes argued that in the Great Depression government drastically reduced its spending since taxes were greatly reduced, and that created a sticky wages and a liquidity trap, where money, the lifeblood of the economy, failed to flow. It wasn’t until the Second World War, when the government had no choice but to partake in deficit spending that the economy got back on track.
Most serious economists have generally credited the Stimulus Bill as having prevented a worse recession and even perhaps a depression. It is worthy to note that Richard Posner, a leading proponent of The Chicago School of Economic thought recently recanted and became a Keynesian (http://www.tnr.com/article/how-i-became-keynesian).
