The Thinker

How to achieve an accountable government

After having spent decades largely ignoring the problem, the exploding federal deficit is suddenly on the minds of Congress. It’s so on their minds that they have forgotten to work on other things, like creating jobs. This new deficit fever is especially surprising given that Republicans are leading the bandwagon, since their deficit spending caused most of our debt. Moreover, one of their heroes, Dick Cheney, famously said deficits don’t matter.

While debt matters, I doubt our increasing indebtedness is what is driving these new deficit hawks. What matters is that a vote on the debt ceiling can be used to restrain the size of government, and Republicans passionately care about that. The same senators and representatives, who just a few years ago were voting for programs to increase the debt, and just last December agreed to extend tax cuts for the rich and lower social security withholdings, are now threatening not to extend the debt ceiling next month.

Something does need to be done about controlling our debt, but intelligently, not stupidly. I consider myself a fiscal conservative. That does not mean I am also ideologically aligned with “small government”.  I simply believe that, in general, government should to live within our means. To me this does not mean we necessarily cut spending to match expected receipts. If we as a nation decide we have priorities, like addressing global climate change, and that requires raising taxes, then I am okay with raising taxes. I suspect we would be long gone from both Iraq and Afghanistan had we had “pay as you go” wars. In fact, the Iraq war probably would never have started, and our debt would be at least a trillion dollars less.

There are times when reducing deficit spending is counterproductive, and that may still be true today. We know enough about economics now to know that spending money stimulates others to spend money, which helps the economy grow and creates jobs. If our federal deficit is about $1.5 trillion a year, taking that much spending out of our economy suddenly will be like throwing sand into our nation’s engine. This effect can be observed in Great Britain, which chose sudden and severe austerity. It is finding its unemployment rate soaring, its GDP declining and its taxes much higher. Perhaps they had no choice given how overextended they were. At least in the short-term, austerity is causing immense suffering for no obvious reward. In general, debt is undesirable, but is it more undesirable than negative growth and increased unemployment? Shocks to any system are rarely beneficial.

To me it makes much more sense to come to consensus on national deficit goals and systematically work toward them. A pragmatic goal would be to have a balanced budget in five years and a credible bipartisan law in place that gets us there. How to make it credible? It could be that the president’s budget has to meet the yearly goal, and first be scored by the Congressional Budget Office (CBO), which asserts it as financially sound. If the deficit is $1.5 trillion, reducing debt by $300 million a year should be doable, particularly if it allows for taxes to be increased if spending is also cut. While we are easing off the economy’s gas pedal, perhaps the country will perk up enough where that growth will provide more tax revenues, thus making spending cuts less draconian. Why put our nation through needless pain?

I think our debt speaks to two larger problems. The first is political dysfunction for which traditionally deficit spending has been the consequence. In addition, we often spend tax money inefficiently or on “nice to have programs” of marginal value. We already have organizations like the General Accountability Office (GAO) and the CBO that exist to inform policymakers on whether programs are effective or not. The problem is Congress rarely takes their advice.

We already know how to intelligently solve most of these problems; we just lack the will to do it. Medicare, for example, wastes tens of billions of dollars a year by paying fraudulent bills. It probably cannot be solved by audits alone, as the volume of billing makes it impossible to root out all fraud. Systemic change is needed instead. There is also a lot of waste when we pay providers for unneeded services and tests. Doctors complain they don’t earn enough from Medicare reimbursement to be profitable. The evidence is overwhelming that they make up for it by adding additional tests and procedures.  Consequently, Medicare needs to reward efficient health care based on satisfactory outcomes. Medical practices suspected of a lot of bogus billing should be audited, prosecuted when possible and publicly scorned if they bill for markedly more procedures per patient than most practices. Ironically, even with its waste, Medicare is still far more efficient and cost effective than private health insurance. If we could find effective and cost effective ways to deliver health care in the United States, and cap defense spending to inflation, then most of the other problems would solve themselves.

I favor automatic sunset provisions for all programs unless they can be independently shown to be achieving their objectives for the agreed upon budget. New programs should be established with clear goals, with expected outcomes required within defined timeframes. These accountability criteria should be part of the legislation. The CBO should provide language for objective criteria that the program would have to meet and it should be inserted into an accountability part of any spending legislation. The GAO should be the independent arbiter of whether the programs actually met their goals. If they did not, programs would automatically sunset unless Congress granted an extension. This too would do a lot to align our government toward being efficient by building efficiency into the system.

This is similar to how I manage my own financial life. Government is more complicated of course, but these principles are solid and should scale. If we could actually govern like this, then maybe no one would talk about out of control government again.

 

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