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| Is this a trick question? |
As should have been expected, Congress and the White House
shook hands on a thirteenth-hour fiscal deal that makes almost nobody happy.
It takes the kind of perverse genius that emerges only
within committees to strike a “grand bargain” that hacks off both
neo-conservatives and progressives in equal measure. “The certain result will be an economic pie
that doesn’t grow fast enough,” Michael
Goodwin grouses, “which will lead to new demands for more redistribution
under the guise of ‘fairness.’ Always,
the government redistributes by taking the first bite for itself.” But David
Rothkopf counters, “While many in Washington are breathing a sigh of
relief and some are trying to spin the outcome as a win for the president,
those who characterize this bill as a genuine victory for anyone at all have
clearly lost perspective.”
On the income side, taxes go up for everybody, though
largely for the well-to-do: the top tax
bracket goes from 35% to 39.6%; estate taxes increase 5%; capital gains and
dividends taxes increase from 35% to 40%; and the SSI tax rebate sunsets,
returning to 6.2%. Somewhat offsetting
these increases are extensions of Obama’s child, earned income and college
tuition tax credits, “bonus depreciation” on new business property and
equipment investments, and credits for R & D costs and renewable energy.
On the expenditure side, though, nothing much was really
accomplished beyond the usual don’t-put-off-until-tomorrow-what-you-can-put-off-even-longer
approach to the deficit. Except that
doctors took it in the shorts and lost some incentive to serve Medicare
patients, which should please everyone who grumbles about the undeserving poor
taking advantage of entitlement programs … and ignores that it hurts the
deserving poor as well. (Unless they’re Randians,
who think that “deserving poor” is an oxymoron.)
Happy freakin’ New Year.
No, there’s no gift receipt for this; we’re stuck with it. And I do mean stuck.
No surprise, then, that those who’ll be paying more taxes
this year are hollering already, though the stock market paid our fearless
leaders a remarkable compliment by jumping up 1.8% to 2.5% (depending on which
metric you use — the former is the Dow Jones, the latter NASDAQ). Since the expenditures can only got kicked
down the road a couple of months, people are already pre-fighting the next
battle over budget cuts.
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| Transfer Payments (red) vs. Defense (blue) as Percentage of GDP |
The obvious targets are military spending and transfer
payments. Except that military spending,
as much as it is ($834.5 billion), has been declining over the last sixty years
as a proportion of the budget (from 85.25% in 1953 to 22.19% as of July) and in
comparison to gross domestic product (14.63% to 5.28%, just up from the
Clinton-era low of 3.71%). Moreover, the
Department of Defense puts more people to work than just those on the
government payroll; the Pentagon buys an incredible amount of stuff, from F-35s
to ball-point pens, from UAVs to undershirts, plus more than enough food to …
well, feed an army.
And all this spending indirectly pays the wages of thousands
upon thousands of people along the production chains: e.g., the miners who extract
the iron from the earth, the refinery workers who turn it into steel, the
millers who turn the steel into armor, the factory workers who turn the armor into
M1A2 tanks. We’re not talking government
cheese here … these people work for a
living, and they pay taxes. (More on this subject at another time.)
That leaves us with transfer payments. Primarily Social Security, Medicare and
Medicaid.
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| This is how much of federal receipts transfer payments represent. |
The “big three” safety-net programs account for almost three-quarters
(73.65%) of all transfer payments, almost half (46.68%) of the federal budget,
and represent 11.1% of GDP. As such, it
presents a nice, fat target for those wishing to dam the river of tax dollars
... especially those who can’t understand why those damn slackers won’t get
real jobs with real health benefits and stop sucking on the public teat.
Which just begs for the question: What “real jobs”?
As
Lanny Ebenstein points out, we’re still over four million jobs down from
where we were in 2008 (the graph below is from 2006); of the 847,000 jobs added since June, almost three
quarters (621,000) have been with local, state and federal governments — not to
say, I hasten to add, that these aren’t
real jobs. So far, the private sector
has been creating jobs at such an anemic rate that it can barely keep up with
the increase in the population base, let alone replace the jobs lost.
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| Jobs lost since September 2006 |
Unemployment is down
because the labor force participation rate is down; translated, that means
that people have quit searching for work, or have finally run past the federal
extension of unemployment benefits and are no longer represented in the system. As of September, almost 48,000,000 people —
about 15.5% of the population — were receiving food stamps; at that time, BLS’s
U-6 metric had 14.7% either unemployed or underemployed.
And you want to shrink the safety net? Good luck with that; let me know how that works
out for you.
Look, I’m under no illusions as to the efficiency of the
current system; I know that all three of the big safety-net programs are
plagued by waste and fraud, that they’re burdened beyond their original design. I also know, however, that “starving the elephant” doesn’t work,
that it doesn’t force bureaucrats to spend federal funds more effectively. Rather, they tend to compensate for the waste
and the fraud by obstructing legitimate claims from the deserving poor or (as
above) reducing the incentive of third parties to participate.
Moreover, no
matter how much money the CEOs represented by the Campaign to Fix the Debt
throw into the fight, these programs enjoy far too much political and
popular support to take more than token cuts.
To save money on these programs effectively, to really make these
programs efficient, Congress will have to put on some overalls, climb into the
machine and plug the waste-and-fraud leaks.
That, however, is seemingly too hard. Much easier to demonize the recipients as
lazy bums sucking on the public teat.
