Another Great Morning in the Nation’s Capital

By :: June 24th, 2011

I woke up to the headlines in today’s Washington Post – House Majority Leader Eric Cantor and Senate Minority Whip Jon Kyl were walking out of the budget negotiations. The Democrats, they said, were insisting that revenue increases be part of any agreement. No revenue increases were acceptable – period. Not even the closing of loopholes that few could defend with a straight face would pass muster. As the Post editorial writers noted this morning, Tom Coburn and other Senate Republicans may think it is OK to cut ethanol subsidies, but because that is scored as a revenue increase, it will never be acceptable to the House majority.

I ate a healthy breakfast in my comfortable air-conditioned house and stepped into the air-conditioned car in my garage to head for the DC Metro. As I drove into a nearby suburb to catch the subway, I noticed all the traffic lights were out. Today we have another power failure, affecting who knows how many homes and businesses. It will just be a blip on the evening news. The drivers adjusted, treating the nonfunctioning traffic signals as four way stop signs, and I soon arrived at the Metro. Today, the trains on the line I take were running on schedule. But at my downtown station, one of the deepest in the system, none of the escalators were working. We trudged quietly and uncomplainingly up the steps in the heat and humidity. And metro escalator failures are such a common event, I doubt it will get any news coverage.

But we are told we don’t need to spend more on these or other public services or public and private infrastructure. In fact, if they are in the public sector, we should cut them. And no one should have to pay higher taxes – especially those with the highest incomes who may rely less on public services or the social safety net. The worst thing we can do is to enact “job-killing” tax increases. If we have 9 percent unemployment following a decade of tax cutting, imagine how bad it would be if we reversed course. Instead, we are told, we need deep and immediate spending cuts, although advocates of these cuts sometimes forget that people who work on publicly funded projects also have jobs.

You may think I just woke up in a bad mood today. But that would be wrong. I woke up in a good mood. After all, it’s Friday. It was the series of breakdowns – none an extraordinary event – in the first hour of the day that soured my outlook.

We do face a serious long-term budget problem going forward. And both spending cuts and revenue increases will need to be part of the solution. I hope our leaders can find sensible ways to pare spending that maintain key infrastructure and protect our most vulnerable citizens. And I hope they find ways to raise revenue that eliminate outmoded preferences, spread the burden fairly among those with different incomes, and minimize economic harm. But sometimes, I confess, I am not very optimistic that any of this is about to happen and today is one of those days.

4Comments

  1. Michael Bindner  ::  3:59 pm on June 24th, 2011:

    The Republicans are bluffing. This is all to put on a show for the freshman members and the Tea Party folks back home. The powers that be know that they have to compromise eventually, since not doing so at all means the tax codes of January 1, 2013 look a lot like December 31, 2000.

  2. Michael Bindner  ::  4:00 pm on June 24th, 2011:

    The thought of the contortions the GOP will have to go through in the near future puts me in a very good mood.

  3. CDOSQUARED5  ::  5:31 pm on June 24th, 2011:

    Put all new public employees on defined contribution retirement plans with no healthcare benefits beyond regular Medicare during retirement… after that, we’ll have a credible discussion on infrastructure spending. Until then, it’s all going to be viewed as a ruse to protect union compensation.

  4. Vivian Darkbloom  ::  4:16 am on June 25th, 2011:

    I’m sorry to hear a about your bad morning. Personally, I find that turning off the air conditioning saves energy, reduces those energy prices (a current drag on the economy) as well as damage to the environment. Besides, opening the window might help clear the head and improve one’s mood. Try it. It works!

    But, seriously, I think your attempt to link lack of infrastructure spending to the debate over spending cuts is misplaced and misleading.

    Think about it. If the situation with the DC traffic lights and Metro escalator is truly due to lack of public infrastructure spending, then the current debate over spending cuts can’t be directed towards something that already does not exist. Just like you can’t love what you don’t know, you can’t cut what doesn’t exist. How much of the current federal budget is currently devoted to public infrastructure spending? My guess would be hardly a percentage point. As I understand it, the current debate about spending cuts deals primarily with entitlement spending on programs such as Medicare and Medicaid, Social Security, extended unemployment benefits, defense spending, etc. If we were not spending so much money on these programs, which have little to do with public infrastructure, much less public investment generally, we’d have much more money available to make your trip to work more comfortable and safe.

    This brings to mind another relevant issue about spending, and a very topical one. The US economy has been in recession now for almost four years, I think, at least as measured by inflation-adjusted GDP. We’ve had the federal government spend massive amounts of money on “stimulus” measures that have nothing to do with fixing your DC infrastructure problems. In addition, almost one-and-one half years of federal government energy was committed to pass a highly partisan and unpopular health care bill that commits us to spend another $1 trillion over the next 10 years. This does nothing to fix your DC Metro escalator or your DC traffic lights or to put people to work.

    About a year ago, after it was becoming evident that the type of spending that was chosen failed to “sitmulate”, the present administration admitted that “well, it is more difficult than we thought to put in place ‘shovel-ready projects'”. So, instead, we spent the money on non-infrastructure related projects that have had a very short-term effect (and minimal at that) and no investment value. And, we used the opportunity of this crisis to pursue a partisan re-distributive social agenda under the guise of economic recovery spending (never let that crisis go to waste). This is not what John Maynard Keynes had in mind when he wrote about counter-cyclical government spending.

    Had the administration shared your concern over the DC escalator problem, they might well have put in place a stimulus program to alleviate these types of infrastructure problems. If this had been done over two years ago, those shovels would now be ready and more people in DC would be at work using them. In the interim, I’ve not even heard of a credible suggestion for the type of real infrastructure spending that might get the economy going and get people to back to work. Because of this continuing lack of foresight and planning, I fully expect the administration to suggest, once again, that we incur massive additional deficits to fund short-term stimulus measures.

    I would be perfectly willing to cut spending in other non-productive areas in order to finance the type of project that will improve your trip to work, as well as your mood. For me, the debate about spending is not just about how much we are spending, but what we are spending it on. Are you willing, for example, to devote future increases in extended unemployment benefits to fixing the DC metro escalator and other real public infrastructure projects so that people will be paid to work rather than not to work? Or, to re-direct the $1 trillion of spending under ACA over the next ten years to repair bridges, roads, metros, street lights so that those without health insurance can actually get a job?

    Another thing. I would not exclude the possibility that the problem with DC’s infrastructure might have as much to do with bad management as it does to lack of funds, but perhaps we should focus on one problem at a time.