Exercisers, Dieters, and Real Fiscal Fitness: A Field Guide to Budget Politics After the Ryan Pick
Statement
A lot of the chatter this week has been about Mitt Romney's selection of Wisconsin Congressman Paul Ryan as his running mate. (Some of that chatter has been on the campaign's Facebook page, and if you've missed it you might want to "like" or "subscribe" now.) If you've been following on Facebook, then you know I've been throwing cold water on the wildly implausible claim that Paul Ryan is a libertarian (just because he read Atlas Shrugged??), or even that he is a small-government conservative (despite his votes for bank bailouts, auto bailouts, and military detention of citizens without trial??). But let's focus on his strong suit, the budget.
On the one hand, the Ryan pick probably means that arguments about the federal budget will play a prominent role in this year's presidential election campaign. Moreover, the Democrats' demagogic attacks on Ryan's Medicare plan, and any competent defense Ryan mounts on that topic, will draw attention to a program that is horrifically underfunded and can't possibly survive without a drastic overhaul. So that's the good news about the Ryan pick: more public discussion of the budget.
The bad news is that the budget arguments between Democrats and Republicans are almost entirely beside the point, because neither party is proposing any actual cuts in spending, and both would have us continue to borrow money against our children's future earnings until at least 2040. (In actuality, there is not much chance that we could keep borrowing that long, but that doesn't seem to concern our "leaders.") The buzz about Paul Ryan makes this as good a time as any to review the ways in which a Libertarian budget policy will differ from those characteristic of either Republicans or Democrats.
Broadly speaking, "deficit reduction" rhetoric falls into three main camps. In one camp we have the Exercisers. The Exercisers openly embrace very active government. They are very reluctant to do anything even to slow the growth of existing programs, and any actual reduction in government spending is out of the question as far as they are concerned. Consequently, the Exercisers usually say they want to increase taxes, at least on the "rich." President Obama is an Exerciser.
The Exercisers may also propose some spending restraint from time to time, like freezing discretionary spending and "paying for" any new spending with offsetting program cuts or tax hikes, but these proposals will be mostly for show; the fine print will always render these ornamental bits of "restraint" mathematically immaterial.
As a result, the Exercisers don't really propose to balance the budget themselves; they want to wait around for us to do it, by working harder and producing more income to tax. We are the real deficit reducers in this scenario; we change the deficit equation by working hard enough to boost federal tax receipts. In fact, many Exercisers think that boosting tax revenue is so important that it justifies spending more money now, on the theory that a bigger government spending more of our money will actually "stimulate" the private economy and create more jobs. The truth is that trying to stimulate economic growth by spending more government money is like trying to make your dog happy by grabbing his tail and moving it back and forth; it's phony and it doesn't work. (If you missed that essay, read it here.) But the Exercisers either don't know that or choose not to acknowledge it, because it would undermine a good deal of their political program.
Most of those who oppose the Exercisers will be Dieters. The Dieters treat excessive federal spending the way many of us treat excessive eating: as something we need to moderate but which it's not practical to reduce very much. The Dieters will trim here and there, and they'll be conspicuous in their refusal to pass new spending programs. Unfortunately for the Dieters, we need to cut spending by more than 40 percent to get it down to the level of tax receipts, and the Dieters can't bring themselves to propose that. Paul Ryan is a Dieter.
Say this for the Dieters, though: They know we need to reduce government spending rather than just sending more Ho-Hos to Washington. This can sometimes lead the Dieters to oppose any measure that raises new tax revenue from any source. But without deep reductions in federal spending, the Dieters are playing almost as much of a waiting game as the Exercisers. Again, with the Dieters in power, the only real hope for a balanced budget will be for us to balance it, by working harder and producing a larger total output from which government can take its cut. Dieters don't publicly endorse the Exercisers' belief that government can stimulate the private sector by spending more, but they tend to find plenty of other reasons for government to spend more, particularly on the military and particularly for big spending projects in their own home districts. (In Ryan's case, failed banks and failed automakers are also big beneficiaries of government largesse for which he voted.)
The third group, by far the smallest for the time being, is the group that I have sometimes called the Zeros. The Zeros know that we're not supposed to have a budget deficit at all; that when the Treasury gets to zero, Congress is supposed to stop spending. The Zeros also know that zero happens to be the correct amount that should be appropriated for many federal programs. And when they find such a program, Zeros enthusiastically propose to zero it out. You might know the Zeros better by their more common name: Libertarians.
Libertarians propose deep cuts in federal spending, driven by the complete elimination of programs that are deemed unnecessary, unhelpful, unconstitutional, or just too expensive. Libertarians would never dream of submitting a ten-year budget showing ten straight deficits, as the other two groups do. If elected in sufficient numbers, Libertarians would balance the budget in the very next fiscal year.
Why do Libertarians show so much more fiscal discipline than the other two groups? Largely for reasons that have nothing to do with budget math. Unlike the other two groups, Libertarians do not accept the basic premise that government spending is good for us. Libertarians don't think of federal spending as a necessity for our economic health (like the Exercisers) or as a sweet-tasting treat (like the Dieters). We Libertarians think federal spending rarely makes voters better off, and often makes us worse off--not (merely) because we can't afford it but because it interferes with our personal and economic liberty. Libertarians find it intolerable that Congress dictates how we work, play, save, invest, hire and fire, and even eat. We're tougher on government spending because we think most government spending would be bad for us even if there were no budget deficit.
Libertarians are for reducing taxes as well, because a smaller government requires less revenue. But many Libertarians (including this writer) would also be happy to eliminate special-interest tax credits that have been stuffed into the revenue side of the budget. Unlike Dieters, we object to government coercion in the form of tax credits just as much as we object to government coercion in the form of costly regulatory programs. Given the opportunity to replace the income tax with some other tax that Congress couldn't use to manipulate the economy, many Libertarians would jump at the chance.
Thus, while almost every candidate will claim to be in favor of fiscal discipline this November, it really matters what kind of discipline they favor. Both Exercisers and Dieters share the assumption that government spending is presumptively good, while the taxation necessary to pay for those programs is presumptively bad. No one should be surprised that the clash of these views produces a result that sounds a lot like gridlock, but is actually the ideal bipartisan compromise: more spending, without paying for anywhere near all of it.
The path toward real, long-term fiscal fitness lies instead with the Libertarians. Voters who genuinely want fiscal discipline may get it only if they focus first on liberating our economy from decades of federal micromanagement.
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