Arnold Kling  

Attention: Liberals and Progressives

The Genius of Libertarianism... Why the U.S. is Ungovernable...

Take it as given that U.S. fiscal policy is unsustainable. It was unsustainable before Obama became President, and one can argue that he has made it worse. It was unsustainable before Bush became President, and one can argue that he made it worse. That is not the issue here.

The issue is whether this unsustainability should be considered a moral problem. What "unsustainable" means is that the current government is making promises that it cannot reasonably expect to keep. The promises that are being made to future beneficiaries of Medicare and Social Security, to bondholders, and to others will not all be kept. In other words, our leaders in Congress and the Administration are lying, but we are not sure at this point who is going to bear the burden of those lies.

I think that this is a serious moral problem. What would a liberal or progressive say? Some possibilities:

1. The problem is a lack of willingness to pass tax increases.

2. The problem is a lack of willingness to have the government take over health care and lower costs. Warning: I have difficulty accepting this argument. It ignores the fact that government already controls Medicare. Saying that the government needs to take over Medicare sounds as silly as saying, "Keep government away from my Medicare."

3. There is a higher good served by government making promises that cannot be kept.

4. Government making false promises is a not a big deal. The analogy would be with people driving faster than the speed limit, not with Bernie Madoff running a Ponzi scheme.

Can you elaborate on any of these arguments to make them persuasive? Or come up with other arguments?

Comments and Sharing


COMMENTS (22 to date)
RL writes:

"Government making false promises is a not a big deal. The analogy would be with people driving faster than the speed limit, not with Bernie Madoff running a Ponzi scheme."

Actually, they may think the better analogy is a police officer driving faster than the speed limit vs. you driving faster than the speed limit...

SydB writes:

Shouldn't you ask what a conservative would say? Dick Cheney said "deficits don't matter."

I think this was the general sentiment of many conservatives.

I would call it a moral problem myself.

David writes:

I think the fundamental issue is the attitude that "in the long-run we are all dead".

This approach means that the current generation is de-facto borrowing from future generations. The moral issue stems from the fact that: (i) the future generations are involuntary and unsecured lenders (ii) high default risk associated with the loan.

Another closely related aspect is that only minor part of citizens is ready take full responsibility for their lives and decisions. This is also in my view the core of the financial crisis. The attitude that someone else (other current and future tax payers) will pay for my incorrect decisions provides framework for perverse wealth redistribution from responsible individuals to irresponsible ones.

ab writes:

The modern liberals and progressives I talk to say things like:

1. "The rich aren't paying their fair share." (which is almost exactly Arnold's first statement, but with a more populist/class warfare tone)

2. "We need a health care system like the system in France." (which is almost exactly like Arnold's second statement, except they love to point out that France spends less per capita)

3. "Who cares about fiscal deficits in a time like this, we should be concerned about unemployment/poverty."

4. "People who claim we have unsustainable fiscal policy are nothing but fear mongers"

I think the first and second statements that Arnold mentioned can be the most convincing. Some justifications I've heard:

1. Raising taxes means the government collects more money, as long as people get the personal and societal benefits from government services, they won't complain about having to pay higher taxes.... or.... people will recognize their civic duty, and willingly pay higher taxes if they're properly educated on the matter.

2. Less spending on health care means can put more money in the pockets of the people and government, and less to insurance companies that drive up the cost.

SydB writes:

Let's see: Liberals and progressives spend money and charge current tax payers who can vote them out of office.

Conservatives spend money and charge future tax payers who can't vote them out of office.

Which is more immoral? Obviously the conservatives, who have created this "the future will pay for itself" mindset.

But that's ok. Deficits don't matter. Right?

Maximum Liberty writes:

I think that an implicit argument of some progressives is something like:

The problem is overstated. There are complex, but managable solutions that we experts would discover and put into place if you would just trust us enough to let us do it(1). In our wisdom, we would find a way to do this fairly, so that the burden falls on those who can bear it.(2) Yes, this might mean tax increases, but it might mean other changes, too. And if you trusted us enough to handle other things, too, we would do so many other good things that would offset any burden you would have to bear.

Possible additions or alternatives:
(1) Or, "if you would just stop being so greedy as to oppose us."
(2) And maybe, "The very fact that you oppose our solution would just show how greedy you are."


Mathew H writes:

"It was unsustainable before Bush became President, and one can argue that he made it worse"

I seem to recall we had surpluses before bush was president. If things stayed the way they were and we didn't have a tax cut or two expensive wars. What would our GDP to dept ratio be today? Could we have made it over the baby boomer hump without too many problems?

Philo writes:

"[T]he current government is making promises that it cannot reasonably expect to keep. The promises that are being made to future beneficiaries of Medicare and Social Security, to bondholders, and to others will not all be kept." But these "promises" are of a peculiar kind. If they really bind anyone, it is someone else, not the person or people making the promise.

When I promise to do something for you tomorrow, it is the same person now making the promise who is supposed to fulfill it tomorrow. But the people who constitute the government *now* will mostly be out of office in a generation, when some of these "promises" are due to be fulfilled. *Other people* will have to act if what is being "promised" is to come to be.

Normally one person may not, by a (pseudo-)*promise*, morally bind *another person*. True, corporations can enter into legally enforceable contracts for future performance--present corporate officials can legally bind future officials of the same corporation. (This is a legal, not a moral, point.) But present government officials can legally bind the actions of future government officials only in very limited respects. Congress can legally terminate Social Security and Medicare if it chooses to do so; it is (its members are) not legally bound to continue these programs.

There is no legal obligation, and neither is there a moral obligation. A newly elected politician can say: I did not create this mess of "entitlements," and I am morally permitted--indeed, given my office, I have a moral obligation--to correct the errors of my predecessors. By voting to end Social Security and Medicare I am contributing to disappointing many people, but *it is not my fault* that they are to be disappointed. What I am doing is *nothing like* breaking a promise that *I made*.

Collectivist thinking leads some people (wrongly) to treat organizations such as governments as if they were continuant *people*, overlooking that they are made up of actual people, who are already operating under moral constraints of their own.

David C writes:

Outside of the stimulus package, I can't think of a policy initiative that Obama has undertaken which added to the deficit. Given certain assumptions, it is possible that by bolstering the economy, the stimulus will not have increased the deficit by as much as people think. Given other steps Obama has taken in regards to reducing the deficit, there's a credible case to be made that Obama's presidency will in the end have had the overall effect of reducing the deficit. On the other hand, the argument that Bush's presidency reduced the deficit is not at all credible. Suggesting the two are similar in this regard is disingenous.

Lord writes:

I'll go with not a big deal. What can't go on won't. Promises no one should believe are promises no one should care about. Politicians promise the moon and green cheese before every election, so what? I find the entire concept of intergenerational transfer a farce, created more to obscure than illuminate. Name one thing with an effective lifespan greater than that of humans without need of replenishment over that time. It doesn't exist and neither does any other means of transfer between generations. Each will create their own future. Worry more about real things and less about accounting.

floccina writes:

The promises are vague enough that I see no reason that they cannot keep them, after all in a sense we only promise bond holders little pieces of paper with dead presidents on them.

I do not see an inability to raise taxes at some future point. Take SS as the number of recipients grows the program becomes politically stronger. The more voters on SS the more likely that the median voter supports higher taxes so as to fund SS.

Parker Sheppard writes:


Actually, conservatives cut taxes and borrow from future voter, who are better off because businesses used the tax cuts to increase output and create jobs. The future does "pay for itself," so long as we make the proper investments.

Yancey Ward writes:

No one borrows from the future. All present benefits are provided by present producers, and all the future benefits will be provided by future producers. If the burdens are too much (and I am quite certain they will be given the promises being made), future producers will put a stop to the transfers they consider too much to bear, and if the takers of these benefits are too numerous to make this possible through the political system of voting, then the slaves will revolt violently. My guess is the threat of violence will be enough to lessen the burden.

Mercer writes:

"conservatives cut taxes and borrow from future voter, who are better off because businesses used the tax cuts to increase output and create jobs"

That was the theory when Bush Jr had two big tax cuts. The actual result was no increase in the number of private sector jobs.

Many leftist writers say why should they be responsible and balance the budget when they are in power if republicans will increase the deficit with more tax cuts and wars when they are in power. The comment I quoted illustrates their point.

Tom West writes:

I'm not certain what the problem is. Presumably when you can no longer reasonably borrow money to pay the bills, then taxes rise steeply.

That's what happened when when Canada's deficits grew too large, and it may happen in Canada again.

My guess is the threat of violence will be enough to lessen the burden.

Oh good grief - the people who are making the most are the ones that have the most to lose in a violent struggle. At least highly taxed non-American nationals could always threaten to move to the US. Where are highly taxed Americans going to go?

Yancey Ward writes:


I disagree. By your logic, slaves revolting would have more to lose than they would by aquiescing to an unwanted burden.

Voting one's benefits can do one no good if those providing them simply refuse. That is all they have to do, refuse, and that one has more to lose by trying force those burdens on future providers. Put another way, I don't worry about this overly much because the burdens are purely voluntary in the end, and if they are too large, the receivers of future benefits will have no choice but to give way, by one means or another. As a commenter above wrote, these are not promises of a normal sort- they are promises made by people in no position to keep or enforce them.

Tom West writes:

I hope we're not talking past each other. My point is that if my taxes go up by 50% to pay for gov't expenditures, I'm still a lot better off paying these taxes than trying either armed revolt or simply refusing to pay.

At least, I don't see any sign of revolt in the many jurisdictions in the world (Europe, Canada until recently, USA in the 1960's) that have significantly higher taxes. You do get people leaving, but i think the USA would be suffer less from that than any other country on earth.

Now, having said that, you might well have the majority deciding that the benefits are not worth the extra taxes if they have to pay for them right now.

Stephan writes:

My European Liberal answer would be: "Don't panic. Once the sh... hits the fan we'll introduce a modest federal VAT compared to socialist Europe and everything will be fine."

Waldo writes:

I have this image of an expensive toy in the hands of a spoiled child. Taxes increase because we buy things. And the demands of the American public are bottomless.

However, what bothers me is paying for things I didn't ask for. For example, how many Americans do you know who demanded more street lights and pump stations in Iraq?

mulp writes:

In my view, the problem is a problem with the intellectual culture of the US.

Reagan promised a free lunch, great things without taxes or government.

I haven't seen an economics textbook or popular economic and government book that does anything but argue taxes are bad, and government contributes nothing to the welfare of people.

In short, the intellectual message is "government is the problem," a position that runs counter to that taken by those who drafted and ratified the US Constitution.

Of course, none of these books, nor those who loudly proclaim "government is the problem" explain how terrible things will be for some people without the government so the politicians are elected by people who are fully behind making things terrible, so the politicians have no fear making things terrible for large and generally influential groups of voters.

To take the points above:

1. Economists pretty plainly say taxes are bad and have zero benefit ever, zilch, nada - taxes are evil.

Further, no not look at the empirical evidence that the nations and states with higher taxes are better places to live in the views of most people - the facts are wrong when is is contrary to theory and ideology.

2. US economists teach, more always costs more, cheaper always delivers less, do not pay attention to the facts - the greater efficiency of health care spending in Israel, Japan, France, Canada, Switzerland, and dozens of other nations is a myth.

3. government never delivers, is always corrupt, and this is always true because government is never responsive to the people because the people are helpless sheep, so the solution is to get rid of government.

Ignore the empirical evidence that no, or weak, government is present in the most corrupt territories, or are norm in communal societies that are overrun and wiped out by those with guns seeking to exploit the resources of those territories. Ignore the fact that the US occupies a vast territory formerly populated by people with minimal government eliminated by a strong central government that passes a law to wipe them out: Indian Removal Act, in order to transfer their and wealth to supporters of the strong government: the American people.

I suppose one might argue that the treaties made with the original Americans by Jefferson, Adams, Madison were promises that couldn't be kept.

4. Economists make the promise that if government gets out of the way, bank failures, Madoff, subprime loans to people who have no prayer of paying them, et al will never happen because every individual is smarter than government in fining the truth.

Ignore the empirical evidence to the contrary, periods of competent government oversight are myth and stable and strong economic growth are myth.

Ignore the fact that long term investment doesn't pay capital gains because buy and hold does not involve selling assets so no capital gains taxes are due, so let's cut short term capital gains to make pump and dump more profitable, because speculation creates wealth, while investing for the long term destroys wealth. And ignore the fact that only labor produces anything, and let's tax labor at higher tax rates while cutting or eliminating taxes on speculation because churning assets will create more goods and assets because selling an existing asset is better at creating capital growth than making and selling a new asset.

Let's run our nation on the basis that theory gives us free lunch - all the benefits of government without taxes or government, and the free lunch that wealth can be created without labor merely by reselling the same old foods and assets multiple times, or by taking the assets of others who have little government to defend themselves or assets and then spreading the wealth of assets via government - who needs to invest for the long term when ages of investment of others can be cashed out.

If the intellectual foundation of government has been undermined, as it has over the past few decades, how can government stand strong and serve the people?

Steve Roth writes:

Unequivocally, #1.

True fiscal conservatives (liberals) believe in paying their bills.

U.S. debt/GDP: after declining steadily from WW II to 1980 (from 120% to 35%), it started climbing in (surprise!) 1980, and has been going up ever since (except--briefly--under Clinton).

The Reaganomics fairy tale has empowered politicians (including Dems, but especially Pubs) to buy votes using the world's easiest pander--"I'll cut your taxes!"-- with money borrowed abroad and from our children.

We know that among prosperous, developed countries that tax between 28 and 50% of GDP (local/state/federal combined), government size/taxing/spending has no correlation with long-term growth. We know that economic growth (by many measures) has been greater under Democratic administrations.

We know that when you consider local, state, and federal taxes combined, our tax system is completely nonprogressive above about 50K/yr. Somebody making $60K pays the same share as someone making $60m.

So yes--we should implement increased and increasingly progressive taxes (especially pigovians). If our tax burden increased from our current (and long-standing) 28% to just 30% (still lower than any other prosperous country except Japan and South Korea), our fiscal problems would be solved. We'd be paying for the government we've chosen.

And no, the sky would not fall. In fact, there's an awful lot of quite excellent evidence to suggest that over the longer term we would be more prosperous as a result, not less.

Loof writes:

Hear! Here!

This topic, Attention: Liberals and Progressives, caught the attention of a few fiscally conservative liberals. Attention: Conservatives and Regressives becomes more the topic.

Regarding debt, trust, and repayment: Geithner’s speech to Chinese economists on the subject and the spontaneous laughter expressed a whole lot.

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