Friday, April 29, 2011

The New Morality

It strikes me that so much of our political rhetoric is engineered to accomplish two ends:  simplify the issue for mass consumption, and frame it in a way that creates volitional momentum for the electorate.  I guess that’s kind of stating the obvious.  Maybe some issues really are like that . . . but I suspect that, more often than not, politicians and pundits are seduced by this framing mechanism as a political shortcut.  Why deftly wield a scalpel when you can forcefully wield a sledge-hammer?

Consider the current public debate regarding the budget and federal debt.  The Left appeals to some moral principal in the matter – “what would Jesus cut?” – assuming that just because the government does spend money on certain programs, it does so as a moral obligation.  Under this logic, government spending eventually absorbs the entire economy, and, like our Greek friends, people riot in the streets because the government won’t give them jobs.  I’m not exactly sure who is responsible for creating wealth in that model.

On the other hand, the Right, seeing the political expediency of a moral appeal, frames the issue of deficits and debt as a moral abdication of the highest order – the equivalent of stealing food from the mouths of babes.  These are the same people, mind you, who object to the alteration of the Social Security normal retirement age.  So the political dialogue is now largely a matter of who can more convincingly portray righteous indignation, and you merely have to decide which moral outrage you find particularly compelling.

Deficits are not intrinsically moral or immoral – this holds true even for BIG deficits.  It’s just a number.  The question is really about the utility of those deficits.  Suppose, for instance, the result of recent deficit spending had been a massive surge in investment, jobs growth, and productive output.  Or suppose someone had a magic crystal ball where everyone could see exactly what would have resulted without that spending, and saw some sort of post-Apocalyptic Mad Max scenario.  We would all be saying, “ah, good show, Mssrs. Bernanke and Geithner.  Huzzah.”  But, it didn’t and we can’t, so we don’t and we won’t.

In another little contrendium factoid, I would like to point out to conservatives (data provided below) that the Reagan administration embarked on a policy of almost unprecedented deficits, and conservative economists praise him for doing so, and that on three fronts:

  1. it pitted the credit rating of the US against the USSR, effectively bankrupting and dismantling the Evil Empire without all the nastiness of assured mutual destruction.
  2. by reversing increases in capital gains taxes, the Administration was willing to put current receipts on the line for the sake of investment and growth.  In retrospect, most economists agree this fueled growth and recovery, but it was probably ‘hella scary at a time of increases in defense spending and high interest rates.
  3. in the perspective of dyed-in-the-wool supply-side advocates, it shifted wealth “to more productive utilization,” meaning the top, where it could be used for investment and growth.

In other words, the smartest thing Reagan ever did was run up a big deficit.  How we judge that decision now is through the effects.  How we judged it then was our belief about its anticipated effects.  And that, I think, is the real argument at hand.  I'm not arguing that deficit spending or the current level of Federal debt is a good thing.  I'm just arguing that the argument about morality is weak, at best.  If we want to avoid the accusation that we're being opportunistic and disingenuous, then we should get back to the real point.

Receipts, Expenditures, and Deficits (Inflation-Adjusted, 2005 dollars)

Federal Deficit as a % of GDP

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