The Art of the Budget Deal

The good news is that President Donald and the Republican and Democratic leaders have reached a deal, expected to be voted on and signed by the end of the week, which will avert a governmental default and the economic cataclysm that would surely follow. The bad news is that deal adds another couple trillion dollars to a national debt that sooner or later will be just as catastrophic.
For now, though, no one seems to care. The Democrats remain the party of big government, and realize that for the two years of the budget deal they are unlikely to get the big tax increases they want to address the deficit, and the agreement gives them a few hundred billion dollars more to spread around to their voters. The Republicans are no longer the party of fiscal responsibility but rather the party of Trump, the self-proclaimed “king of debt,” who told reporters on Monday that “We are, I think, doing very well on debt, if you look at debt limit, however you want to define that, but we’re doing very well on that and I think we’re doing well on a budget.”
We’ll leave it to Trump’s die-hard supporters to explain exactly what the heck that means, as they seem to speak his language better than we do, but the gist of it seems to be that he’s quite comfortable about another couple of years of trillion dollar deficits, and maybe four more after that if he gets reelected. He and his die-hard supporters will probably revert to the old-fashioned Republican outrage about fiscal irresponsibility as soon as another Democrat occupies the White House, but for now they’ll talk about the great deal he got.
The Democrats agreed to another big hike in defense spending, and Trump told reporters “Very important we take care of our military, our military was depleted and in the past two-and-a-half years we’ve undepleted it, okay, to put it mildly,” adding another Trump neologism to the language at no cost to the taxpayer. There’s no money for the big beautiful border wall that Trump the Mexicans pay for, but neither is there anything to prevent Trump from diverting funds from the military budget to build a mile or two. The Democratic leaders also gave oral assurances they wouldn’t complicate future budget negotiations with with any “riders” regarding abortion or other controversial issues, although it’s not clear how Trump will hold them to that.
The deal does allow a few hundred billion dollars more of discretionary spending, but for at least two years and maybe six that Democrats won’t have much say in how it’s spent, so a lot of Democratic congress members are publicly fuming, especially those newcomers that Trump has lately been urging to back where they came from.
The last of the old-school Republicans who really believed all that talk about limited government and fiscal responsibility and the looming were also disgruntled, with the president of the Committee for a Responsible Budget saying “It may end up being the worst budget agreement in our nation’s history.”
Despite all the grumbling on both sides of the aisle we expect the deal will be sealed by week’s end, when Congress takes it annual summer vacation. House Speaker Nancy Pelosi and Senate minority leader Chuck Schumer retain a fairly tight rein on their caucus, hardly anyone in the Republican party dales challenge Trump on anything, the entire political class seems to realize that few of us still care about about the looming debt catastrophe, and absolutely no believes that anyone in Washington, D.C., can come up with solution before vacation time.
The deal at least kicks the can of crisis a bit further down the road, and no one’s likely to have to run for reelection a year from next November explaining what they did the the global economic Armageddon happened, and they can all hope they’ll be dead or retired with a sufficient stash of gold and guns and canned food when the reckoning does come.
Addressing America’s debt will require tough talk and harsh medicine for the American people. The Democrats will have to acknowledge that their utopian dreams are for now too expensive, the Republicans will probably have to forgo another round of their beloved tax cuts, and both parties will have make unpopular changes in such popular programs as Social Security and Medicare and even our recently undepleted military. That kind of political courage is scarce these days in either party, though, and far scarcer than the deficit dollars the Fed will keep printing.

— Bud Norman

Five Long Years of Stimulation

Monday marked the fifth anniversary of the American Recovery and Reinvestment Act, better known as “the stimulus,” but we did not observe the occasion with a celebration. What with the economy the way it is, and having failed to apply for any available federal funding, we could ill-afford a fancy party or a bottle of fine champagne.
There was a warm rush of nostalgia, however, as we recalled the giddy optimism that attended President Barack Obama’s lavishly ceremonial signing of the law. We were told that the law would cost a mere $800 billion, already a insignificant sum by Washington standards, and yet keep the unemployment rate from topping 8 percent and bring it down to 5 percent by 2013 with “shovel-ready jobs” while lifting two million Americans out of poverty and saving the world from global warming by creating a new “green energy” industry. Since then the cost has grown to $2 trillion, the unemployment rate hit 10.1 percent and stayed above 8 percent for four years before enough people finally gave up looking for a job to push it down to the current 6.6 percent, the poverty rate has risen to a 50 year high, the president has joked that the shovel-ready jobs were “not as shovel-ready as we expected,” and the “green jobs” that survived the bankruptcies of the subsidized companies turned out to cost about $5 million apiece. This winter’s wicked weather suggests some success in combating global warming, but otherwise an objective observer might reasonably conclude that all the optimism seems have been unfounded.
Still giddy after all these years, the law’s indefatigable apologists offer two lines of defense.
One is that even if the stimulus did not live up to its promises it did at least prevent the country from sliding into another Great Depression and the earth from sliding out of its orbit and into the sun. The White House economists did overstate the stimulative effect of the stimulus, according to this popular theory, but only because they had generously underestimated the damage done by the stinginess and de-regulatory zeal of that free-market-crazed cowboy George W. Bush. This ignores that only months before signing the stimulus into law Obama had criticized Bush’s “irresponsible” and “un-patriotic” budget deficits, and fails to name a single regulation Bush eliminated that might have caused the financial downturn, and conveniently omits any mention of the Clinton-era “affordable housing” policies and their sub-prime shenanigans that did in fact cause the crash, but it has the emotionally satisfying appeal of blaming Bush.
The other argument is that the stimulus failed to achieve its stated goals only because it was far too small. One might expect that a $2 trillion infusion of freshly-printed cash would be sufficient to stimulate some economic activity, especially if you throw in a third trillion from the Trouble Assets Relief Program passed just a few months earlier, but apparently not. The theory that if what you’re doing only seems to be making things worse you should do far more of it is not new, having been around at least since it informed the Roosevelt administration policies that prolonged the actual Great Depression for nine years before the massive stimulus program that was World War II came along, and its temptation to those handing out the money has not diminished over the years.
Neither of these arguments can be definitively disproved, as economics does not allow for the sorts of controlled laboratory experiments that would settle such questions in the harder sciences, but there does seem ample reason for a healthy skepticism. The notion that handing out a couple trillion dollars of Monopoly money to reliably Democratic constituencies is the only logical way to revive an economy has an inherently suspicious ring to it, and much of the stimulus money was spent in ways that are remarkably unproductive even by government standards.
Those cheeky iconoclasts at The Washington Free Beacon chose ten especially outrageous expenditures that illustrate the point. One program spent $389,357 to find why young men drink malt liquor and smoke marijuana, when we could have told them for a far more economical sum that it’s to in order to get drunk and high, and another spent $8,408 to find out if mice can get drunk, which could have been learned for the price of a mouse and a beer. Another spent $1.2 million on a University of California-San Francisco study of erectile dysfunction in overweight men, while Yale University was given $384, 949 to study duck penises. (This genital pre-occupation reminds of us an old bureaucracy joke too blue to repeat here, by the way, but if you’re interested shoot us an e-mail with proof that you’re of age in your state and we’ll pass it along.) Yet another $100,000 went to fund anti-capitalist puppet shows, a particularly peculiar way of promoting economic growth, and still another $600,000 was spent to plant trees in the wealthiest neighborhoods of Denver, which presumably offset the benefits to the hated rich with commensurate benefits to beloved and impoverished Mother Nature. If such wacky use of public funds does not convince you of the wisdom of the stimulus, perhaps the $1.3 million spent on signs advertising the benefits of the stimulus did the trick. Judging by the amount of Obamacare’s budget spent on advertising its blessings, the government seems quite convinced that you’ll fall for it again.
Which is not to say the apologists aren’t quite right, of course. Perhaps such spending did save the country from breadlines and a return to the hit parade for “Brother, Can You Spare a Dime,” and perhaps it would have worked better yet if only we’d be willing to shell out a cool million for even more duck penis revelations, and there is no denying that the earth hasn’t slipped out of its orbit and into the sun. We can’t quite shake a nagging suspicion that Keynesian is bunk, and that like global warming it’s a scam to legitimize the government’s ravenous appetite for power, but if we could afford a fine bottle of champagne we’d drink it.

— Bud Norman