I've been thinking about this since I set aside a newspaper editorial a few weeks ago. The authors selected six of the options as a way to reduce the federal budget deficit by $100 billion over five years. This approach sends the message that easy answers are out there and that legislators are just too obtuse (or lazy, or beholden to other interests) to see the light and take action. I submit that answers are indeed out there, but that enacting many of them would be viewed as a direct attack on a particular constituency. Any move to increase revenues (primarily achieved through levying taxes) or decrease spending will be accompanied by a vocal opposition. The issue turns bipolar when viewed as a liberal or conservative initiative, at which point constructive debate often ceases.
Consider one of the solutions presented in the editorial - the federal excise tax on motor fuels, which is 18.4 cents per gallon of gasoline. That rate has not changed since it was adopted on October 1, 1993. Adjusting the tax for inflation (adjusting the 1993 amount to equal spending power in 2009) would require an increase of 9 cents per gallon, which would increase revenues (and thus decrease the deficit) by an estimated $45 billion over the next five years. Raising a tax - must be a liberal initiative, right? Indeed, a number of Democrats support this idea. But many on the left also oppose it based on the notion that fuel taxes tend to be viewed as regressive; that is, they disproportionately affect lower-income consumers. As towns and cities further invest in capital projects to create urban centers marketed to young professionals with disposable income who can "live, work, and play" in one area, a tax on fuel will be even less burdensome on individuals in higher tax brackets. Conservatives generally oppose increasing the federal excise tax on gasoline as well. You can see how thorny this issue could become during debate.
The CBO report considers cases in which the federal excise tax on gasoline is increased by 50 cents and 25 cents, increasing revenues over 5 years by $291 billion and $146 billion, respectively. Given the considerable resistance expected to any initiative to raise the tax, are either of the CBO's proposals worth considering? Would either proposal pass? Note that this particular measure would not result in a real reduction to the deficit, as the increased revenue would be used to fund transportation infrastructure projects around the country. However, the newspaper editorial devotes one paragraph to this measure, focusing on the positive effects it would have on the deficit. The fact that it would not likely see outside a House subcommittee chamber is conveniently omitted.
I do firmly believe that we should revisit the current rate, if for no other reason than to assess the level of federal highway deterioration we are willing to accept as the Highway Trust Fund cracks under the pressure of maintaining current roads and bridges. The National Surface Transportation Infrastructure Finance Commission released a report in February 2009 that notes that current Highway Trust Fund revenues represent approximately 41 percent of federal spending needed to maintain the nation's highways and transit systems and only 33 percent needed to make improvements (p. 53). That is a scary statistic, especially considering the tragedy that can occur with neglect (e.g., the August 2007 bridge collapse in Minnesota). It is interesting to further note that the items that make it on the U.S. Department of Transportation's list of needed improvements (the list against which the current level of funding is applied to arrive at the 33 percent metric) must represent a benefit to cost ratio of 1.2. That is, the projected benefit of a proposed improvement must be valued at $1.20 or more for the DOT to invest $1.00. That actually eliminates from consideration any improvements that would just barely break even for taxpayers. On the upside, the shortfall in the Highway Trust Fund looks a little better with this approach.
Politics aside, my point is to show how complex one proposal can be. Now multiply that a couple of hundred times and you can see how easy it might be to cherry pick a few sensible-sounding proposals, but how difficult it might be to get a bill for any one of them signed into law. That is why a newspaper editorial that purports to "easily" identify $100 billion in savings is misleading the public into wondering why our elected representatives cannot do the same thing. My parting recommendation is that you get into the CBO's report and find some policy options that you think make good fiscal sense. Make sure you consider the pros and cons, some of which are addressed in the report. Let me know what you think.
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Point taken. It is often far too easy to sit back and point fingers at government officials (elected or appointed). Admittedly, I know this from personal experience. In fact, I'm surprised my pointy fingers have enough strength to type this comment. But at what point, or perhaps it's better phrased as, to what standard can we hold officials responsible for reaching resolution? For finding the win/win? Do we need to bring the Indian Talking Stick into Washington? Surely our representatives believe a positive outcome can be acheived, else why bother? And if it indeed can be achieved, what's the hold-up? You encourage us above to, "not lose sight of the unfortunate reality that many things are easier said than done." As much as I agree, now I'm just depressed! Maybe you should start incorporating a wine pairing suggestion for each blog article. For this one, I might need a whole bottle of your best Bogle ;)
ReplyDeleteWell said. Another way to view "easier said than done," however, is by considering the importance of deliberation and debate. If legislators got together and passed a few measures that netted a $100 billion reduction to the federal deficit over five years, a lot of people would be quite upset. Note that whether Congress increases revenues or decreases spending, the net effect on the deficit is the same. Finding that $100 billion almost necessarily requires greater revenues, decreased spending, or some combination of the two (I say almost because of the "efficiency savings" that only sometimes can be achieved). Raising revenues by raising taxes is worthy of deliberation and debate, as is cutting spending on existing programs. Some of the proposed measures fit neatly into the ideology of one individual, but are inflammatory to another. Contrary to popular belief, many of those differences are discussed behind closed doors and result in a bill that is palatable to many. So my point is not to undermine any optimistic outlook that good ideas are out there and can actually make it to the floor for a vote; rather, I don’t want people to fall victim to a misguided view of how easy it would be to enact sound policy proposals if only our elected representatives had a backbone and a brain. I believe that sound policy is enacted because of deliberation and debate, not in spite of it.
ReplyDeleteAgreed. Let's add "backbone" and "brain" to the "I want to be a [fill in government position blank]" checklist! A third criterium that would provide a nice little trinity of values should be selflessness. Let's not forget a core value of serving is that representatives speak for their consituency, and therefore, should not be motivated by self-serving interests. Or not?? Too often, what is NOT palatable to one person may indeed be palatable to the masses. So here's the rub: Is that Rep's "job" to defend the minority position, or to speak for the masses? Is it easier to simply go with an individual gut response, rather than try to represent a People? I am likely misguided, as is anyone who shares my willingness to admit a deep confusion about the inner-workings of our governmental bodies--though, ironically, it may be this self-awareness that makes me a little less miss-guided than the know-it-alls?--but even I know it's always more complicated than it looks on the surface. That's why I'm in marketing, and you're in politics ;)
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