In my upcoming book, Rejected by the Times, I take a break from foreign and domestic policy to discuss a variety of new ideas on American cultural issues.
So, put this Op-Ed in the culture category. I do not agree that I have to: a) love the Tea Party; b) hate the Tea Party; or c) accept name-calling. Even as a long time registered Democrat, I actually do know a Tea Partier or two. Worse I like and respect them. On their core economic concerns my only disagreement is timing.
I find their social policies typically unattractive nanny state interference in private lives and some of the politicians more entertainers than serious. But hangout at a Democratic headquarters in your county and you will hear people claiming the way to fix the entitlement programs is to just raise taxes.
The best outcome in Congress this year is to pass legislation that puts together a plan of cuts to the entitlement programs, top to bottom tax reform, and phase in any tax increases or entitlement cuts in years three and five. You could certainly make immediate cuts in some areas, but in the way you would in a business. You cannot solve a decade of overspending in a quarter. And if you try, then you will throw the country into crisis the same way I witnessed a CEO drive a company into bankruptcy with draconian across the board cuts instead of a strategy for the future.
In big business the ideal culture is one that feeds not only on the competition but also itself. In a growing company, the board and management are constantly evaluating which businesses are no longer growth engines at the same time they launch new offerings. They sell, restructure, and dissolve businesses as they build new ones.
So, the overall goal of cutting out ineffective government programs as a permanent and ongoing cultural attribute appeals to me. But, cutting spending is a tactic not a strategy. In a strong business you do not cut across the board. In a weak business that needs restructuring you are cutting everything to reduce costs to make the next debt payment.
The former is a formula for worldwide dominance and the later is the months before bankruptcy.
If you have a culture of continuous improvement and innovation, you are not throwing money around in great years and cutting with a methamphetamine-enabled machete in down years. The cutting, selling, and eliminating happens every year. As does planning, executing, and investing in the future.
The problem we have today is that the federal government has since the Eisenhower administration lurched from fiscal expansion in good times to contraction in bad times. You do not have to believe in Keynes to understand the federal government has since World War II more often than not reacted late and done the exact opposite of almost any conservative or liberal economic theory. No economic theory supports a cycle of across the board spending increases in good times and across the board cutting in bad times.
We have turned the financing of national government into the equivalent of a day trader timing the market.
As I understand most Tea Party economic positions, they believe that the government over expanded between 2000 and today. I agree with that general proposition. They believe that we need to cut spending now to spark the economy.
Here I do not understand the evidence that cutting both successful and ineffective programs in a bad economy makes any sense. In the United Kingdom this theory is underway. Prime Minister Cameron is slashing almost every aspect of government, including public sector employment and the military.
And the economy in Britain that was recovering has dipped back into at best slow growth and probably recession. No data since the Republican landslide in 2010 supports the proposition that immediate draconian cuts will spur economic growth. In fact the month after month government layoffs have swollen the already dismal unemployment figures.
I think all the conservatives I know would agree that you should not waste a taxpayer’s dollar in a recession or an expansion. Ineffective public policy should always be snuffed out at the earliest moment. Otherwise just as in a poorly run business, you create within government a culture that ineffectiveness is acceptable. But you cannot announce in the largest recession in seventy years that you are going to remedy a decade of folly in a single stroke. And if you do, then you should expect the contraction going on in Britain.
Apple is actually selling more goods. Most American companies have grown their profits or bottom line through cost cutting with a heavy reliance on layoffs. Apple is actually growing their profits in a way that generates employment.
Getting more growth that generates employment will generate more tax revenue, which is ultimately the most important driver. Not just in the payment of national debt, but in our position of relative safety in the world. If China can grow at 9 or 10 percent a year with a defense budget that continues to climb as a percentage of GDP, then when China’s economy surpasses our economy we will have our first nation state military rival since 1990. Getting our three hundred million man economy growing again is the only way to maintain deterrence against a billion people growing far faster.
And before we rush off to follow Tory Britain it is worth noting that British defense cuts means it no longer has an aircraft carrier. Getting focused on the debt is a good way to find yourself disarmed with a sputtering economy. A lesson you would think the party of Winston Churchill would accept. Unfortunately, the history of the Tory party in Britain includes not only Winston Churchill, but Stanley Baldwin, Neville Chamberlain, and the other great appeasers who were fixated on 1930’s deficits while Hitler rearmed Germany.
In corporate crisis management training and real crisis the biggest mistake is to identify the wrong problem. That is all that the Tea Party has done. And we do have to resolve our balance sheet during the coming decade. That perspective does not make them uneducated louts.
The cultural issue is not Planned Parenthood or same sex marriage. The cultural issue is that it is impossible apparently to discuss a simple issue of timing without name-calling and false claims of oppressed liberties. There is nothing constitutional about providing and paying for retirement pensions and healthcare. While the commerce clause allows the government to provide these benefits, it certainly does not require it in the way it requires a judiciary or a military.
Raising taxes to invest in the military to keep our dominance, basic R&D, a national energy grid, or some other part of the future I can understand. But raising taxes to preserve retirement benefit growth at multiples of the inflation rate is failing to govern. Just as throwing hundreds of thousands of government workers onto the unemployment rolls in a recession is failing to govern.
So, by all means make major spending cuts to entitlements the minute we have growth. Steady and constant cuts each and every year to all ineffective programs. That is the culture of basic governance. Once we have that we can get on with doing great things, because financial stability is not extraordinary. It is what is necessary and ordinary.