Here's the Deal

Moneybox
A blog about business and economics.
Feb. 8 2013 11:47 AM

Here's the Deal

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There's a bit of an odd void in American political commentary. You hear a lot of alarmist panic about an imminent fiscal crisis, and then you hear a fair amount of counterpunch about the perils of austerity. But the view that holds sway in some very influential circles—the White House, for example, and the Federal Reserve Board—lacks effective, clear spokespeople in the public realm. David Leonhardt's Here's the Deal: How Washington Can Solve The Deficit and Spur Growth steps into the void with a sober, sensible argument that rebalancing America's budget priorities is deeply desirable, even aside from the question of an imminent fiscal crisis.

Leonhardt's view is essentially that we're at perilous risk of budgeting ourselves out of the kind of public investment strategies that are necessary for long-term growth. For a while now the expansion of programs that serve primarily to increase the consumption level of the elderly have been paid for by reducing the share of national output that goes to Cold War military programs. We can keep running that play for a bit longer, but the combined weight of demographic transition (more old people) and rising health care costs is going to exhaust that play soon. At that point, the federal government is going to be unable to afford spending on investments in physical infrastructure, R&D, education, and other foundations of long-term growth unless we engage in a mix of tax increases and cuts to entitlement programs. Arguing persuasively for positions that are in some ways the conventional wisdom is a challenging task, but I think Leonhardt shows that being calm and restrained in your claims is a lot more persuasive than some of the debt demagoguery we've heard over the past few years. The point isn't that we need to rebalance our budget priorities in the next six months or face disaster, it's that our priorities have been out of balance for a while and, generally speaking, it's better to reorient sooner rather than later.

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My two cents is that in diagnosing the source of this dysfunctional budgeting, Leonhardt somewhat overplays the idea that politicians need to "level" with the voters, and underplays the absence of responsible party government. The Madisonian political system, with its sharply polarized elected officials and party activists, turns budgeting into a very complicated series of iterated games in which strategic considerations trump policy considerations. During periods of unusual unitary partisan control, we actually did see properly structured choices—namely, a 2003 GOP push to tilt spending more in favor of the elderly by adding a debt-financed prescription drug benefits to Medicare, and a 2009 Democratic push to tilt it in the other direction by cutting Medicare payments to finance Medicaid expansion. But neither party explicitly avows either of those agendas, and neither gets enough time in office to properly play them out. The mainstream concern elected officials have is not, "What would I do if I got to do what I wanted but was accountable to the voters for the consequences?" but rather, "What negotiating position best suits my aims in an endless series of standoffs?"

That's a deeply problematic question for people to be asking themselves, and I don't know what to do about it. But if we were electing a prime minister soon, I'd want the winner to read Leonhardt's book. And if you're not a member of Congress and just want to understand the budgetary landscape on the merits, this is a great place to start.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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