A Useful Guide to the Federal Budget

On September 15, 2012, in budget, debt, deficit, by admin

David Wessel. Red Ink: Inside the High-Stakes Politics of the Federal Budget. Crown Business, pp. 204, $22.00 The United States, once a creditor to the world, is now in debt. Indeed, America is now one of the world’s biggest debtor nations, with an external debt to GDP ratio approaching 100%. While politicians from both parties [...]

David Wessel. Red Ink: Inside the High-Stakes Politics of the Federal Budget. Crown Business, pp. 204, $22.00

The United States, once a creditor to the world, is now in debt. Indeed, America is now one of the world’s biggest debtor nations, with an external debt to GDP ratio approaching 100%. While politicians from both parties acknowledge that the debt and the federal budget deficit pose substantial policy challenges, there is very little consensus in Washington as to what actually should be done to safeguard the nation’s finances for future generations, or whether deficit reduction should even be considered a primary goal at the moment.

When President Obama mentioned reining in the deficit at the recent Democratic Convention in Charlotte, there was scant applause in the crowd, at least in comparison to other topics he addressed. On the other side of the aisle, there are some ideologically-driven politicians who actually seem to believe their own rhetoric that immediately enacting massive spending cuts will miraculously lead to a new golden age of American economic prosperity, without any deleterious consequences or spillover effects.

With respect to the upcoming 2012 elections, when Mitt Romney chose Paul Ryan as his Vice Presidential nominee, he elevated the Budget Committee Chairman to the national stage. From that point on, the “Ryan Plan,” the Wisconsin Congressman’s eponymous budget proposal, which includes significantly cutting spending on federal safety net programs, would be an integral part of the presidential campaign.

An educated layman, bombarded on all sides by pundits in print, and talking heads on cable news, would be hard pressed to make sense of all the various accusations, counter-accusations, and outright lies that permeate the nation’s political discourse this election cycle. For readers interested in finding a guide for the perplexed to the nation’s budget in all its complexity, Red Ink: Inside the High-Stakes Politics of the Federal Budget is a welcome and useful addition to a growing corpus of literature on the peril posed by the national debt to America’s future.

In Red Ink, David Wessel (Wall Street Journal) has penned a relatively brief, but comprehensive, study of the federal budget and the seemingly never-ending political fights over it. The budget is not just about numbers or an abstraction devoid of greater political significance. “With far more precision than thirty-second sound bites or campaign speeches,” posits Wessel, “the president’s budget and alternative crafted by the opposition in Congress reflect contrasting visions for the size of government in America and the role it plays in the economy.” To illustrate his point, Wessel contrasts Jack Lew, President Obama’s director of the White House Office of Management and Budget (OMB), with Congressman Paul Ryan. Whereas, Lew “believes in government,” Romney’s running mate is on a “quest . . . to limit the size of government, including spending less on Medicaid and almost everything else.” Ryan’s “weapon of choice,” according to the author, is the budget.

Given that the budget is such a contentious political issue, one would think that the voting public would be fairly well informed as to how much the federal government spends and on what. Sadly, this does not appear to be the case. Indeed, one of the takeaway lessons of Wessel’s recent work is that the public is often misinformed, perhaps staggeringly so, on budgetary matters. Wessel cites the results of one CNN poll in which a typical respondent stated that he believed food stamps accounted for 10% of federal spending (it is actually around 2%). In addition, the results of a Cornell University poll demonstrate that an amazing number of persons who receive Social Security benefits or are covered by the Medicare program feel that they have not used a government social program. The joke about Tea Party protesters holding signs that read, “Keep Your Government Hands Off My Medicare” would be funnier, if it were not such a sad reflection of the state of public knowledge about the U.S. government’s role in the economy.

Red Ink
is divided into five discrete chapters, each of which is clearly written and well organized. In a more perfect world, voters heading to the polls this November will read the book’s third chapter, “Where the Money Goes,” prior to casting their ballots. He discusses such topics as how voters overestimate waste and inefficiency, how health care spending is rising to a greater extent than other portions of the federal budget, and how Social Security, which accounts for approximately 20% of federal spending, “is perhaps the most popular part of the federal budget.” Regarding farm policy, Wessel notes that President Obama’s most recent budget envisioned ending direct payments to farmers. He also discusses the food stamp program and the expansion of the program under both George W. Bush and Obama.

The book’s final chapter, “Why This Can’t Go On Forever,” is a wakeup call to Americans and their elected representatives. Wessel approvingly quotes Doug Elmendorf, director of the non-partisan Congressional Budget Office (CBO), who has argued that there is a stark disconnect between what the public expects the federal government to provide, especially to seniors, and what taxes people are willing to pay to finance such programs. As much as the public likes to criticize Congress, it must be incredibly frustrating for those rare politicians seriously interested in reducing the deficit to be told by constituents that they want even lower taxes, but that Congress shouldn’t cut Social Security or defense. While Wessel is overall successful in defining the contours of the political debate, his work’s final chapter would have been even more powerful had he been more revealing as to his personal opinions, particularly regarding what approach to deficit reduction would be most preferable.

Red Ink does not end on a particularly optimistic note. Wessel is clearly frustrated by the lack of compromise in Washington, polarized as he perceived it to be between President Obama’s budget and Congressman Ryan’s alternative. “Neither side has enough votes to prevail, and neither is willing to compromise on some amalgam that might spread the pain that both can live with. This is the crux of the issue: the deficit widens, the debt grows, the interest burden gets heavier, the voices grow even more shrill as the budget burden is passed to future generations, and nothing gets done.” If, as I suspect, the 2012 elections result in both President Obama’s reelection and a Democrat-controlled Senate and a Republican-controlled House, we probably ought to prepare ourselves for another two more years of gridlock. Eventually, however, the proverbial ‘can’ may rise up and no longer let politicians to boot it any further down an already long and tired road.

Jonathan Eric Lewis (c) 2012

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