Thursday, February 11, 2010

What's a government to do?

A couple days ago I wrote that the GOP seems to believe that government should offer no services, at least not at the city level. There is an obvious question behind that statement: What are essential government services? What are the things a government (at least one in American) should do? What things should a government leave for someone else to do? What things should a government not do? Why did you make those choices? Who pays for it?

All are interesting questions. But I'm not going to make any attempt to answer them, at least not today. What I am going to talk about is that we in American are steadfastly refusing to answer those questions.

According to Jacob Weisberg in Newsweek, in the first of a trio or articles, that refusal leaves us in a bind. We want Washington to do something about unemployment but don't like the stimulus package and don't want another. We want a fix for health care and we don't. At the root of that ambivalence is this core paradox: We want government to fix problems but we don't want to pay for the fix. We dislike government in the abstract, but don't you dare mess with my Social Security check. We like the idea of sacrifice and hard choices but you better not demand it of me.

Of course, politicians pander to the paradox. As a result, nothing meaningful can get done.

Robert Samuelson's take on the issue actually started with the questions I posed above -- what should the government do, why, and where does it get the money? He then goes on to say that Obama's budget tinkers around the edges, racking up huge deficits for a long time and declaring victory if a deficit is reduced by a smidgen. But we can no longer tinker and we make the problems worse the longer we wait.

Medicare, Medicaid, and Social Security make up over 40% of the federal budget. Participants in those programs would be drastically affected if changes had to be huge and quick. Cutting a current retiree's benefits would create a storm. Better to make changes now so those affected can make adjustments. Changing the benefits of someone who will retire in 10 years allows the affected people to plan for the change.

Evan Thomas says there is a reason why politicians pander to the paradox. They get thrown out of office when they don't. When Obama was campaigning he gave hints that he would challenge the paradox and actually tell voters the hard truth. And actually got elected. Someone has to tell the truth and he is the only one, given the players in Washington, who might. Yet, now in office, Obama is also in the midst of the pandering.

Thomas lists the available options. The feds have relied on an ever improving economy to allow them to handle increasing debts. But the debts are so high and the economy is fragile enough such high debts can strangle growth. Government borrowing squeezes out private borrowing. The Fed can always print money. That eventually leads to high inflation. Raise taxes -- enough to resolve the problem -- would also stifle economic growth. Or lawmakers, led by Obama, can put the national financial house in order.

Obama might lead. But he hasn't yet.

1 comment:

  1. So he should put the financial house in order... in the midst of a recession? This is one issue where, right now, he has to lie - for the good of the country. Your financial system is not in order, and cannot be put in order by cutting spending (now or taking-effect-in-the-future); nor can it be put in order by raising taxes, both of which take money out of the system.

    You've just started on the road to recovery, but have an unemployment level in the double-digits, fewer job openings than unemployed people to take them, and too little willingness to spend in proportion to the problem.

    Your financial house needs disordering more before it gets ordered again, and talking too much about the ordering now won't help order it.