Fiscal Responsibility Is More Than Just Cutting
by Craig Jennings, 5/26/2010
Picking up the thread from yesterday, I want to expand a bit on this term "fiscal responsibility" that is bandied about so often. "Fiscal responsibility" is not simply setting arbitrary limits on federal spending for the sake of reducing the federal budget deficit. Rather, it is an assessment of the current economic and fiscal environments and a determination of an equitable deployment of national resources.
Representatives and senators should acknowledge that there are 10.7 million Americans without jobs right now and millions more working part-time because they have to. Government spending not only funds programs that provide much-needed assistance to the millions of individuals and families that have fallen victim to the baleful economy, but it provides a boost to consumer demand, which is preventing further job losses. In short: yes, deficits can be good things, and fiscal responsibility requires that this be acknowledged. Congress and the president are in fact fiscally irresponsible, not because there is a large deficit, but because they are failing to deploy national resources to put Americans back to work
Fiscal responsibility also means that all mechanisms to reduce the federal budget deficit be considered and be chosen by their propensity to impact the physical and financial security of those who will be impacted by them. This means that cutting cash outlays for non-security discretionary spending should be judged against cutting cash-outlays for security discretionary spending; cutting tax expenditures should be balanced against raising tax rates; reducing aid to states should be measured with respect to aid to individuals; and any combination of federal expenditures or revenues should be weighed against any other combination of federal expenditures or revenues. In this view, setting arbitrary discretionary spending caps or asking for a tool designed to cut only discretionary spending widely misses the mark.
Lastly, fiscal responsibility means clearly defining the objectives of fiscal policy and having a reason to believe whether or not the prescribed policy will have the desired effects. The fact is even if today's federal budget deficit magically disappeared, the long-term fiscal imbalances caused by the rapid growth of health care costs would remain. As these costs outpace the growth of the economy, Medicare and Medicaid will continue to consume ever-larger portions of the federal budget.
Conflating the various budget challenges (current, short- to medium-term deficits; long term debt; Social Security financing; or Medicare and Medicaid financing) is an irresponsible way to begin to address these issues, because different problems have different solutions. Misrepresenting the impact of tax rates on GDP growth and the unemployment is reckless, as it throws up roadblocks to implementing efficient fiscal policies. Suggesting that a two-percent annual reduction in discretionary spending is a tonic for the federal budget deficit is beguiling. Etc.
Unless these criteria are met by our elected officials, our federal budget will continue to steer us away from security and prosperity.
Image by Flickr user orangebrompton used under a Creative Commons license.