Sunday, December 9, 2012

The Federal Government: Stuck In Cruise Control

An adequate driver is one who is pays close attention so that they can adjust to any unexpected hazards and changes that  emerge. They slam on the breaks to avoid rear-ending the car in front of them or swerve to avoid an errant jaywalker. Whereas a good driver scans ahead and anticipates hazards before they even emerge. Combining a sharp eye and good common sense, they anticipate the wall of traffic or drunk Cubs Fans crossing Clark Street and change their course, thus avoiding the problems before they even emerge. But, the very worst drivers are stuck on cruise control; they are either unaware of indifferent to the hazards and the opportunities that lie ahead. No matter what the traffic conditions are like, they are cruising in ahead, in a straight line, at 45 miles per hour, jabbering away on their cell phones, while flipping through the radio station and somehow downing their morning latte. And when questioned by the police officer about how they could run over the cyclists, they always answer with a lie: he came out of nowhere. 

The reckless, third category, the driver stuck in cruise control characterizes the majority of our elected officials, especially those at the federal level. We are headed straight for fiscal ruin, yet for all practical terms, the president and most of the congress are desperately clinging to the status quo. The Congressional Budget Office projects a federal deficit of $1.0 trillion in 2013, yet the crux of President Obama's deficit reduction strategy is to raise taxes on the top 2%, which according to NPR would only reduce the deficit by $56 billion, or 5.6%. If Democrats and Republicans were serious about raising revenue, they would call for the elimination of the Bush Tax cuts for all Americans, which would lower the deficit by only 37%. And if they truly wanted to increase revenue generated from the wealthy, while not harming investment, they would eliminate costly loopholes. But just when you think that Republicans are willing to boldly venture beyond the status quo, they shrink back when asked for the specific loopholes that they would eliminate.

Clearly, the only possible way to eliminate the deficit would be to significantly lower spending.  Nearly sixty percent of federal expenditures goes towards entitlements, which means there is absolutely no way that the budget can be balanced without significantly reforming social security, medicare and medicaid. And evidence indicates that the numbers will get worse, for example, according to the Congressional Budget Office, the Social Security Disability Fund is scheduled to go broke in 2016. Yet, the vast majority of politicians, especially Democrats, rigidly adhere to the status quo. 

Governing by cruise control effects more facets of policy that just fiscal issues. Even as the United States faced record levels of unemployment, we maintained a legal immigration level of 1,000,000 per year. A "dynamic driver" of immigration policy would accelerate, decelerate and change course according to the conditions of the road. Specifically they would lower the number of visas granted during times of high unemployment and raise them when acute labor shortages emerged. An especially careful driver would pay close attention to the segments of the labor force that faced surpluses (high unemployment) and those that fa     ced shortages and adjust the distributions of visas accordingly. They would find that any policy that increased the supply of low skilled workers would aggravate unemployment, while a judicious addition of skilled workers would help foster increased economic growth. And the truly future oriented driver would even consider the 3rd generation descendants in constructing a wise and beneficial immigration road map.  

I suspect that beneath this sclerotic rigidity and shortsightedness is the strong aversion to momentary discomfort or even postponement of gratification, that has taken hold in large segments of American Society over the last few decades. Many parents avoid discipline, even though it may spare future problems. Many educators have inflated grades, out of the fear that they will harm the self esteem of those who do not succeed, even though this approach will limit their future development. This zeitgeist is also seen in much of the corporate world, where a focus on short term profit, over long term development and even medium term risk management, has undermined key sectors of the American Economy, especially banking and finance. All of this begs the question - what are the chances that a long term oriented politician that tells uncomfortable truths would get elected? 


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