Tuesday, October 08, 2013

Two Modest Proposals

I gather that both sides in the current political flap claim to be in favor of compromise, so I have two to suggest, although I doubt either will appeal to them.

1: The budget deficit is running at about twenty percent of expenditure. The Republicans think the budget should be balanced. So the obvious compromise is for the administration to agree to cut expenditure for the next year by ten percent, the House to agree to raise the debt ceiling enough to cover the remaining half of the deficit for the next year.

2. Both sides agree to reduce spending by twenty percent, thus eliminating the deficit and the problem. There remains the question, ignored in my first proposal, of how the cuts are to be made—what will be funded by how much. The House gets to allocate half of the revenue, the President gets to allocate the other half, in each case within the limits of the current budget, insofar as there is one. The House can, in other words, decide to give the defense department 100% of its current allocation or 50% but not 110%.

Neither represents my ideal solution, which would be a reduction in government spending of considerably more than 20% with a good many functions receiving an allocation of zero. But both look better than anything we are likely to actually get.


Dick White said...

Let's switch our Swiftian sources (besides "Two" proposals dilute the satire). What David is proposing is anything but "modest' in a literal sense. I suggest (1) renaming as "A Brogdingnagian Initiative" and (2) distributing to major news outlets immediately.

Daublin said...

It seems obvious to me, either one. Some Congressmen seem to support such an idea, but it's not consistent.

I'm sad to keep reading articles like this:


The first error is that, as discussed here a day or two ago, there's no real risk of default.

The second error is that the economy is in minimal risk should the debt ceiling just stay where it is. You don't have to be a macro expert to see this: just note that if we spend like it's 2000, we will not need any more debt, and there is nothing that has happened since 2000 that has made the economy reliant on federal spending.

For both reasons, this isn't really as much of brinksmanship as I used to think. I just took the news articles for granted, but if you look beneath the surface, they are making excitement out of nothing.

Broadly speaking, many people implicitly attribute something magical and special to the U.S. government. They think that debts don't hurt the U.S., or that spending by the U.S. is automatically helpful.

I no longer think so. It's an important organization, for sure, but it doesn't have magic faery powers.

August said...

I hope they misread each other, default, and then continue to fight like little children until no one will lend to them anymore. We can't get any principled behavior out of them; perhaps constraints will work a little better. QEinfinity is just a sneaky default anyway.

RKN said...

A third alternative as proposed by Ron Paul last time this political kerfuffle arose: Don't raise the ceiling, lower the floor.


Equally unlikely to be appealing to either side, I realize.