Budget Deficit Crises: Whither or Wither Government Spending?

61281575aa7ba69571877aacddd1e5fb (1)There are some – and not just conspiracy theory wacko’s – who say that George Bush deliberately engaged in his seemingly inexplicable public spending spree and his economic mismanagement precisely because it would so overburden the US federal budget that his successor(s) would be forced massively to overhaul and reduce public spending on social programs.

There are those – and not just right-wing nutjobs – who say that Tony Blair and Gordon Brown produced a similar crisis with the budget deficit in the UK because of the natural inclination of the Labour Party – new or old – to tax and spend.

There are many who look at the budget debacles in half the states in the United States, whether run by Republicans in California or Democrats in North Carolina, and who simply throw their hands up in the air wondering if state governments will ever get out of the repetitive cycle of lavish in good times, burn the needy in bad.

Deliberate or accidental, considered or negligent, the fact is that on both sides of the Atlantic at all levels of government over the next decade policy-makers will find themselves challenged to address innovative ways of taming burgeoning deficits.

We can play ostrich, bury our heads in the sand and make pretend that it will all go away with a few speeches about efficiency savings and a couple of sessions with glorified fortune-tellers swearing blind it will be better with the next economic upturn.

We can simply give up and hand the whole debate over to the slash and burn, tea bag tax reductionists who so easily convince themselves and us that the disadvantaged can look after themselves while we congratulate ourselves on ripping compassion out of the heart of the public purse.

Or we can engage in a mature discussion about the very nature and purpose of government spending so as to produce a new paradigm that sees government taking care of its business in a sustainable fashion while finally ending the cycle that has us facing deficit crises at the end of every generation.

In the Eighties, developed economies around the world finally put a stop to the boom-bust cycle of economic growth followed by inflation when we woke up to the connection between money supply and that same inflation.

Maybe we find ourselves so regularly facing up to deficit crises, regardless of our political label, because we have yet to figure out and enunciate a similar, fundamental and consistent philosophical approach to government spending?

And I mean a philosophical approach that takes us beyond and away from the simplistic tubthumpers who reduce the debate to a puerile feud between ‘ooh, pretty bauble, let’s spend’ and the ‘hey, my money, give it back.’

I would posit that any such discussion might want to address the following questions:

1) Should government be the primary provider of public services, or merely the agency that finances those who use them and who cannot afford to pay for them on their own? There’s probably more than one question there.

The first part of the question was one that was addressed by some in the British Conservative government in the Eighties, with regards to the National Health Service in particular – without being satisfactorily resolved.

It could be argued that it is a question that might usefully be addressed with regards to the provision of many other public services, from garbage collection to education.

It is the question that almost always leads to the emotive issue of privatization, which is so often misunderstood because those proposing the notion are none too clear about what they mean.

I’m neither proposing nor opposing. I’m merely suggesting that there is room for discussing whether government is the most cost-effective agency for doing the actual work of building and running schools, hospitals, garbage collection businesses, whatever. Or whether this is better done by private or social enterprise, with government then footing the bill.

The second part of the question is for whom precisely should the government be footing the bill?

Do we have enough money to continue engaging in the Butskellian ideal of removing stigma from the equation of public provision by making available public services to all, regardless of their means? Or do we now want to restrict largesse only to those genuinely in need?

While this may seem a question aimed only at British public policy debate, I wonder whether, for example, it is not time for Americans to ask themselves if they could make more resources available for educating the historically disadvantaged if the ‘historically advantaged’ were now invited to pay for their publicly-provided education?

2) Is all government spending really necessary? Or are there areas where we could usefully question government involvement?

I don’t think I can honestly engage in this monologue without sticking my neck out just a little bit.

I think I would describe myself as a social or progressive libertarian. I believe fundamentally that the economy is a natural force, which is best left to its own devices, with government intervening only to maximize the opportunity of all to participate, or aiding and empowering people and communities during periods of transition.

Within that context, experience has taught me that I may have a more limited view of the usefulness of government than many – while having little if any empathy with those who simply reject government because life has smiled on them and they are too selfish to share their good fortune.

It is not that I do not care for the marginalized or historically disadvantaged. Quite the reverse. I simply wonder if we might not be able to make more public resources more usefully available to aid in empowering the disadvantaged if we stopped wasting public funds in areas where government frankly has no business being involved.

This is where my socially-extended definition of economic libertarianism kicks in. I think that government should restrict itself to those areas of spending which are demonstrably in support of the common good and where communal action is seen as being the best and most cost-effective agency for such spending.

I start with the common defense of our citizenry from threats, both foreign and domestic. And I then include public funds judiciously spent empowering people to look after themselves (so that they might then look after society) and supporting those who may not be able to look after themselves on their own.

After that, I’m pretty much open to questioning any and all public spending. Yes. I think I can live with that as my own personal definition of progressive libertarianism. It may not be where I end up, but it’s a good place for me to start in this discussion.

3) Is it time to start aggressively prioritizing government spending? Is it the case that, too often, we put the cart before the horse and decide what we want to support before working out how much we have to spend?

I’m not sure this is all that complicated. Or maybe I’m just being over simplistic? But I wonder if, philosophical discussion aside, it doesn’t bluntly come down to a succession of one-on-one decisions?

I hold a grant for a museum in one hand, and the funds for a homeless shelter in the other. Which do I choose? I hold spending for Head Start in one hand, and the research for a new fighter-interceptor in the other. Which do we support?

This raises the point that is obvious for many of us, less so for others, that the debate about government finance will not just be about money, it will also and primarily be about values.

For example, we could eradicate the immediate consequences of poverty in the US virtually overnight with a simple declaration from the White House that we will henceforth guarantee every man, woman and child in the United States adequate access to food, clothing, housing and healthcare.

And we could make such a declaration budget and tax neutral. All we would have to do is reduce the federal defense budget and all federal discretionary spending by 50%.

Again, I’m not proposing or opposing such a concept. I’m merely saying that, if we take the view that we no longer have the will or the funds to finance budget deficits, then maybe we need to engage in radical thinking about budget priorities.

The one notion I am advancing is that it is better that such thinking be organized and deliberate rather than allowing it to be haphazard and reactive.

4) I have tried to avoid sinking into rumination that is driven by ideology rather than pragmatism. But political reality demands that I recognize certain emotional bottom lines.

In this regard, should any discussion about government spending and the attendant taxation policies include debate about overall tax and spending burdens?

All I will offer is that in the social democracies of Europe the average for each burden as a percentage of GDP is between 35% and 40%, while in the more libertarian United States it is more like 25%.

Americans may think their percentage too low. Europeans may think theirs is too high.

Around the world, at all levels of government, we face historically high budget deficits. Whatever our political hue, whatever our political rhetoric, sooner or later we will have to reduce government spending.

It’s up to each of us – not just the professional politicians and wonks – to involve ourselves in the public debate about how best to engage in that spending reduction.

We ask for more citizen government. It starts right here.

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Published in: on July 7, 2009 at 7:24 am  Leave a Comment  

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