StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Federal Spending is More Popular than the Tea Party Wants You to Believe

04 Jan 2011
Posted by Stan Collender

My column from today's Roll Call is the ultimate contrarian argument: I say we'll end the year realizing that federal spending is VERY popular.

Popularity of Federal Spending Will Be Realized in 2011

By Stan Collender
Roll Call Contributing Writer
Jan. 4, 2011, 11:12 a.m.

For years polls have consistently shown that more than a majority of Americans say that no area of federal spending should be cut, with the exception of foreign aid.

The poll findings should be taken as gospel, but politicians have consistently ignored or vehemently denied them. That’s going to change in 2011. The substantial and broad-based support that exists for federal spending will become common wisdom as individuals, businesses, industries, associations, communities, mayors, county executives, governors and even whole regions of the United States fight openly to prevent the spending reductions that Congressional Republicans say they’re going to consider this year.

Ironically, the best example of what’s ahead may well be the military base realignment and closure commissions that so often are held up as paragons of how budget decisions should be made. I’ve said in the past that BRACs are special situations and that their process cannot be easily extrapolated to other budget issues. A BRAC is asked to do one very specific thing: determine which military facilities should be closed after a political decision has already been made that some should be shuttered. That’s very different from the much larger policy questions of whether, when and how the federal deficit should be reduced — the types of questions typically asked of budget commissions like the recently failed Bowles-Simpson panel.

But the BRACs are instructive in this case because the parties that would be negatively affected by a base closure almost always fight like hell to prevent it. Cities, states, communities, businesses and chambers of commerce usually engage lobbyists to make the case that their local base shouldn’t be eliminated. They commission economists to conduct analyses of the effects of the closure on area incomes, unemployment, property values and taxes, as well as anything else that they think will demonstrate that closing their facility is inappropriate and unjustified. They work with public relations agencies to get more attention. They also enlist their Representatives and Senators to oppose the proposed cut on their behalf, and the lawmakers are almost always more than happy to oblige.

A second precedent to consider is the public backlash against the two federal government shutdowns in 1995 and 1996. Initially the disapproval came from individuals, whose amusement and curiosity over the Republicans’ attempts to win concessions from the Clinton administration morphed into anger over the disruption to the federal services that they needed or enjoyed, and it spread to companies that did business with the government or relied on federal activities in some way. The shutdowns proved to be so unpopular that, like the character from the “Harry Potter” series whose name must not be spoken, the word seemed to be banned until recently from serious tactical political discussions.

The same defend-our-federal-spending-to-the-death attitude will arise for almost every cut proposed this year. Given that the financial markets and the overall economy are less robust than in 1995 and 1996 and that local officials and workers will assume that the private sector won’t immediately make up for federal reductions, the fight to prevent the spending cuts is very likely to be far more intense than what has taken place up to now.

Those who support the spending cuts likely will try to deal with this by talking about federal finances rather than local economies. We’ll hear about increased government efficiency, higher productivity, a reduced government workforce and a lower deficit. The clear implications will be that only the government will have to make do with less.

Experience shows that those arguments will only go so far because federal workers don’t only live in Washington, D.C. States have fought vigorously over the years to bring federal facilities into their communities to reap economic benefits, and they will fight at least as hard to keep them, especially given the dire forecasts of lower property values, reduced consumer spending and other repercussions of eliminating these jobs. In other words, it won’t just be the federal workers who will oppose the cuts; it will be the supermarkets, “big box” stores, restaurants, car dealerships, landlords, homeowners and others who will oppose the economic pain they see coming.

All of this means that, by the end of 2011, the popularity of federal spending that pollsters have been reporting may finally become common wisdom in Washington, as it already should have been.

The tea party people

The tea party people genuinely believe that government spending inures only to the benefit of people they despise: black- and hispanic-americans, immigrants, the poor, "elite intellectuals", foreigners, liberals, etc. They have been sold this lie by deranged america-hating right-wing maniacs who would rather see the nation destroyed than have to share power with the left. I hope you are correct that when the tea party people come up against the inexorable physical reality of the role of federal government spending in their own lives--like when their cars start getting swallowed up in monster potholes that can't be fixed because their state and local governments are broke--they will correctly attribute these consequences to the decline in government spending. However, I think that the capacity for delusional magical thinking the tea party people have exhibited thus far may be more resilient than you believe.


I suspect the average

I suspect the average teabagger will notice right away when their Social Security and/or SS disability checks stop coming...


It's not delusion, it's basic economics

The article is well-written but flawed. Mr Collender falls into the same old traps of short-termism and big-governmentism.

His conclusion assumes that government production is as efficient and productive as private production. If that's true, why don't we just have "one big company" to provide all goods and services? Because there's value in specialization and incentives. Read Hayek or Adam Smith.

Second, he assumes that we must maintain short-term GDP at all costs by letting government prop up what private enterprise is doing. GDP was created during the New Deal era, and has outlived its usefulness. The production of useless trinkets is "GDP", but the prevention of terrible illnesses is not. We must move to something like Sarkozy's Joie de Vivre index to truly measure the benefit to humankind. (And I'm not some crazy environmentalist, just an old-school conservationist.)

Third, the creative destruction of capitalism is purging unecessary housing jobs and replacing them with new jobs. It is folly to assume that all government employment and spending is more beneficial than private spending or just outright spending restraint. Read Schumpeter. Visit ttp://republicanwhip.house.gov/YouCut/.


Hondo has replied to the

Hondo has replied to the argument he wishes Collender had made, rather than the one he did make. Nowhere in Collender's text does he argue that government spending is anything but politically popular - not efficient, not useful.

In fact, there is a strong argument that efficiency is exactly the wrong measure to apply to government spending, that government's undertake necessary spending that the private sector would not undertake because private returns are low, while social returns are high, that efficiency measures in terms of private returns simply misses the point. That, however, is a critique of Hondo's implicit argument against government spending, and has nothing to do with Collender's piece. Collender did not make the argument that Hondo assets he made.


Honda's argument is that

Honda's argument is that private sector is more "efficient" than public sector. The misunderstanding here is the meaning / definition of the word 'efficiency".

"Economic efficiency" has nothing to do, whatsoever, with the word "efficiency" understood in the common day-to-day parlance.

The common usage of "efficiency" is about the output-input ratio.

"Economic efficiency" is the point in the supply demand equilibrium where it is no longer possible for either supplier or buyer to improve his/her situation without harming the other.

Private sector is more economically efficient than public sector. But that does not mean that private sector uses less input than public sector in delivering their value.


Government spending in the

Government spending in the abstract is very unpopular. Cutting government spending in any meaningful way would require cuts to very popular programs.

The public overwhelmingly wanted the Bush era tax cuts for upper income taxpayers to expire. That would have been very useful for cutting the deficit. We all saw how that battle turned out.


Governments can be efficient and effective

I'm not from the States. Maybe it's different overthere. Where I live, many government companies, products and services - water, garbage collection, sewage, waste water treatment, roads - do an excellent job/are excellent, not only when it comes to quality but also when it comes to price.

Where I live, some government services and companies have been privatized. Railroads, one of the bigger banks in the country, energy and the like. That did lead to higher prices and often lower quality. In the case of the bank: it did not take too long before this formerly utterly dependable institute became insolvent and had to be bailed out. To be sure: there also are some succesfull examples of privatization. But it is against the facts to assume that government companies always deliver worse quality for higher prices than private companies.

I do admit that firms plus markets plus new technology sometimes work magic. Take the cell phone and its offshoots. Take cars. Take movies. But sometimes, 'the market' delivers crap. Take mortgages. Take pension savings: costs of private companies are much, much higher than those of government pension funds.

It's a complicated world.


The Fan

The s---hitting the fan will be when the proposed 100 billion in cuts sends the revenues of hundreds if not thousands of private contractors plummeting. Is the Chamber of Commerce going to represent them and lobby for them, or throw them under the bus?

Cutting 100 billion in spending will eliminate, ultimately, 100 billion in salaries, which at 100,000 per person, is 1 million jobs. And since most of those jobs are contractors in the DC area, just watch the squawking from plummeting housing prices, next door to some of those owned by the new Tea Party representatives.

Get your popcorn ready!




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