Constraint-free spending and the people who claim not to want it
January 19, 2013, 4:43 pm
Filed under: Uncategorized

This is I guess Part 2 in a series of posts I’d call ‘people who help to create political-economic dynamics that don’t actually further the goals they say they want’, if there were a clever way to rephrase that. (Part 1 is Ezra Klein’s longstanding handwringing over having enough money to pay for  ‘tracking down loose nukes’ while at the same time, never having shown any interest whatsoever in constraining how much money is spent on other things.)

This one finds Kevin Drum arguing with Matthew Yglesias why in fact there should be taxes, not just borrowing:

One of the fundamental reasons for taxation is that it provides a constraint on democratic governments. If you want to appropriate a certain amount of the productive capacity of the country, you need to get permission from the citizens of the country, and you need to make that permission painful in some way. Otherwise the government will seize an ever bigger portion of the economy essentially by stealth. This is bad juju.

Welcome to bad juju!

Because it seems to me that every single thing Kevin Drum argues for, in fact, causes the government to ‘seize an ever bigger portion of the economy essentially by stealth’.

I alluded to this dynamic here. In our current setup, we observe a process like as follows:

  1. Congress makes up a number out of thin air, and ‘spends’ it. (‘Authorizes’ the spending.) And inevitably, the left is all for it. Whatever the number is, the left (e.g. Kevin Drum) is in favor of ‘spending’ it, and more. Anyone who raises a voice in protest is shouted down as mean, greedy, or stingy by the left.
  2. There is no budget or otherwise any relationship between the $ number they have chosen to ‘spend’, and federal revenues. Congressmen voting on it therefore face no constraints and there is no meaningful ‘permission from the citizens of the country’ pressure being applied. Because hey! spending is good, not-spending is mean. Congressmen simply do not face any ‘don’t-spend because it causes us pain!’ pressure at this point. The pain is not visible, and diffuse, and ‘later’, and the left always has a reason for insisting we not think about it.
  3. LATER, we realize need to finance the spending with debt. The left (e.g. Kevin Drum) freaks out if we do not, because, say they, that spending once enacted became an ‘obligation of the United States’. So at this stage, any notion of ‘permission’ for spending on things people want/need in a context of tradeoffs and budgeting, has now been converted after the fact into just an unthinking moral obligation, a threat to our national credit that all Smart People are required to approve. “We already chose to spend all this back then”, they say. (“We” did?, think I.) So inevitably, more debt is taken on to cover the spending ‘we’ all agreed to.
  4. Go to #1.

I actually like and wistfully dream about Kevin Drum’s formulation above about how the interplay between taxes, spending and democracy ideally should be. But that process bears no resemblance whatsoever to the actual dynamics in play. There simply is no ‘constraint on democratic governments’ in evidence, because all the processes you’d hope would serve to enforce that constraint have been short-circuited. As a result government does indeed  seize an ever bigger portion of the economy essentially by stealth.

And that’s in large part due to people like Kevin Drum, who now claims he didn’t want that outcome. It is not unfair to question whether that claim is sincere.

1 Comment so far
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There’s only one possible constraint on government spending and it’s long gone.

Once you switch to a currency that the government can simply create at will there are no constraints on spending and the economy will inevitably be entirely consumed by the government (by stealth – if you even want to call it that – it’s more like “by plausible deniability”).

Comment by Steve Johnson

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