Wednesday, July 27, 2011

It's Not Just The Budget

Almost anyone can tell you that the budget debate and the debate on the debt ceiling are complicated. Now that they are tied together, the complications multiply but that's only a part of the story. There are underlying concerns that affect all sides of the negotiations.

There are two additional issues that are less obvious. The first is that this debate is simply a proxy for the decades-old argument about the size and function of government. That philosophical disagreement will be the subject of a future blog.

Front view of the Lincoln Memorial in Washingt...
The Lincoln Memorial
Image via Wikipedia
The second under-the-radar issue is the impact the negotiations will have on the 2012 federal elections. There will be some resolution in the budget and debt stand-off and it may or may not happen before August 2nd. Either way, it appears there will be a definite "winner"  and a definite "loser" among political parties. In this case it may not matter which side has the best ideas; the party that wins the showdown will almost certainly have a real advantage in the next elections.

"Despite what you may read about the public's desire for a compromise, the party that is perceived as yielding is the loser. Make no mistake about that or its ramifications for 2012."

If a real compromise could be found, then the impact on the 2012 contests for President, the U.S. Senate and the U.S. House would have been muted. Unfortunately, with rhetoric elevated to Olympian heights, there seems to be no middle ground.

Increases in tax rates have long been the bane of those supported by the TEA Party groups. A failure to increase tax rates on "the wealthy" is a seemingly non-negotiable demand by House Minority Leader Nancy Pelosi and those of her particular belief set. In addition, many on the left have declared any structural changes to entitlement programs completely off-limits. In contrast, fiscal conservatives have pointed out that without real changes to entitlements the programs cannot survive in the long run.

So, is there a chance for a temporary solution that would allow additional studies and time for cooler heads to influence the outcome? No, President Obama has nixed any short-term agreements by threatening a veto of any agreement that does not increase the debt limit sufficiently to operate the government past 2012.

With little additional, effective debate on spending until after the 2012 election, the party that prevails will claim credit for saving the country's economy and many independents will accept that argument. The party that goes against its base will lose much of its support.

If Republicans increase tax rates, then support among their most conservative supporters would be decimated. The argument will simply be, "There's no difference between Republicans and Democrats." Republicans lose if they are forced to spend resources defending themselves from that charge.

If Democrats fail to increase tax rates, then support among their most liberal supporters would also be decimated. One of the few principles that seems to unite Democrats is redistributive taxation. Yielding on the issue may be seen as a repudiation of that axiom of the left. Remember that socialist Senator Bernie Sanders (I-VT) has already suggested primary opposition for President Obama.

Despite what you may read about the public's desire for a compromise, the party that is perceived as yielding is the loser. Make no mistake about that or its ramifications in 2012.

While arguments can be made that the ends of the political spectrum have no where else to go, there is a real difference between merely voting and offering enthusiastic support. Unbridled public support for a party and for candidates translates into additional funds, additional manpower and additional votes. The party that loses the budget and the debt-ceiling debates will lose votes and seats they might have potentially won. And there is that threat of primary opposition for incumbents.

The future direction of our country should be important enough to get the complete attention of our elected officials, but the real impetus in this debate may be raw political opportunity. It's political and it appears to me that it will be winner take all.

by Ken Carroll

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1 comment:

  1. My friend. Isn’t it sad that there must be winners and losers. Why can’t we all be winners or losers together—no matter what—and honestly seek what is right and good for the country? My disappointment in our two-party system is difficult to hide. Their interests lie not with doing the right thing but with doing the expedient thing; in other words, what is good for the party. Both R&D (Republican and Democrat) are at fault.

    If those men and women really had to scrape together a few dollars to buy their family dinner, or perhaps if a few of them had to go to the emergency room for healthcare because they lacked insurance and the local doctor would not treat them, or if they failed to meet their mortgage payment because they were uninformed and signed a balloon note that rose beyond their ability to pay—under any of these circumstances they might begin to get serious about the budget. Since these guys and gals do not live in the real world, the world you and I live in, they are cocooned from much of the mess that bad policy has gotten us into.

    The expedient decision brings election results and shifts the responsibility to the next generation or the next group of politicians that follow them. You are correct. There is no middle ground. Everyone is out for their own interests.

    It has taken decades to get into this mess. During this time both parties have had ample time to make sound financial decisions. The real solution isn’t found in a short-term fix. History has proven that the past influences the future. Things won’t change on the hill. I dare say that they will not find a long-term fix either. Where are the voices that call for real change? Where are they? Do you hear them? I don’t.

    For what it is worth, here is my opinion. (1) Cut spending by trillions, but do it within the next four years not the next ten or twenty. (2) Raise taxes on those who make lots of money, just do not raise the rate to the point that it becomes burdensome. (3) Corporations must pay taxes. Last year GE, an American company, paid nothing.(4) Begin slowly to enact tariffs and regulations to level the playing field. We cannot compete with China or others whose general labor rate per hour will not buy a coke. Our country is losing jobs because greedy business persons are able to make more money with offshore labor. Bring the jobs home. Companies that do business with overseas labor must pay an amount that would bring balance.

    Somehow all that makes good business sense to me. I guess it is a good thing I’m not in Washington. I’d probably make a few enemies.


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