Any sound system of modern democracy must start with budgets if our nations are not to drown themselves in debt in order that those who are to be its stewards are to promise that which cannot be paid. As described in the book Democracy in Deficit by James Buchanan and Richard Wagner, in the 1970s, the moral restrictions upon spending and the tacit, though often unfulfilled, understanding that it is the duty of the government in power to balance the budget have been broken asunder. Since then governments have been running unparalleled deficits while promising unparalleled privileges to their citizens.
Some of this is certainly politicians promising more benefits (often while promising to simultaneously cut the deficit) to voters during election seasons in order to match their opponents own proposals, but the main cause is certainly the lack of any structural traits in government to actually keep spending in check. Year after year, politicians can continue to run government that borrow a considerable portion of their entire operating expenses without any constitutional measure that provides disincentives against such practices.
A free and open society is not a society governed by the arbitrary actions of politicians, aristocrats or emperors. King Charles II learned that the hard way in 1688 and even the British monarchs have been subservient to their parliaments in the years since then. Instead, it is ruled by general rules of conduct, laws, that apply to everyone, every where and under all circumstances. In his book, The Theory of Moral Sentiments (Part III, Chapter VI), Adam Smith writes about how the virtue of justice is one that is at all times dictated by general rules of conduct:
The rules of justice are accurate in the highest degree, and admit of no exceptions or modifications, but such as may be ascertained as accurately as the rules themselves, and which generally, indeed, flow from the very same principles with them. If I owe a man ten pounds, justice requires that I should precisely pay him ten pounds, either at the time agreed upon, or when he demands it. What I ought to perform, how much I ought to perform, when and where I ought to perform it, the whole nature and circumstances of the action prescribed, are all of them fixt and determined. Though it may be awkward and pedantic, therefore, to affect too strict an adherence to the common rules of prudence and generosity, there is no pedantry in sticking fast by the rules of justice. On the contrary, the most sacred regard is due to them; and the actions which this virtue requires are never so properly performed, as when the chief motive for performing them is reverential and religious regard to those general rules which require them.
Free people are then guided not by the will of others, but how the general rules of society obligate them to act. Tyranny consequently is the usurpation of those general rules for the discretion of individuals.
There is no more of a sacred obligation of the politician to the people he serves than to guard the public treasury. It is certainly true that the government does need resources to operate, but it is similarly true that the government does not ask its citizens to contribute. Taxmen do not walk door to do holding usher's baskets requesting contributions; instead, they just take the contributions that they need. Whether the tax-payer consents or not, this done with the the promise that the government will use that money in order to provide certain services for the tax-payer's benefit. The entire enterprise of proper government can then be seen as the process of turning the tax-payers' money and to transform it into desired services. Hence to take the tax-payers' money within the public purse, and to spend it negligently on expenses that do not better his interests should be regarded as treason.
Deficits, though, inflict havoc upon this process. The reason that they do so is that the government can spend more than it has in order to provide its citizens more services that they could otherwise afford therefore corrupting the connection between paying taxes and receiving services. Every dollar that the government borrows is a dollar that will have to be taken in future taxation. When the event that calls for deficit spending is a war, the accumulation of debt does not nearly have the corruption affect as it does when government's in peacetime since a war is understood by the public as a temporary event that must be financed with credit. This cannot be said of the massive amount of deficit spending that has been taking place within the United States to support both its welfare state and its military-industrial complex. Neither are temporary. When it comes to deficit spending to support both, politicians tell their voters that the government can supply services to them that Americans' contributions to the treasury can support. As a result, it forces politicians to be dishonest about the quantity of services the government can supply and it rewards those who provide the most convincing lies about how the government can continue to provide services without having to take more from the public.
Any system that encourages dishonesty must be reformed. Deficit-spending in peacetime is little more than politicians using the power of the financial markets to evade the great inconvenience of scarcity during their time in office. It is in ultimate juxtaposition with the ethos of a government whose officials serve as stewards of the public treasury. As such, it must be reformed and it must be reformed constitutionally for the only solution to this problem are now designed checks and balances that forces politicians to guard the integrity of the treasury. What we need is a government that forces politicians to actually grapple with scarcity in providing government services and to frankly tell tax-payers that they must reduce their expectations of government services or expect to pay more in the future.
Besides a law that obligates the sitting government to balance the budget, what we need is for the budgetary process to be the defining moment in any year in politics. Politicians need to fight over the budget, to ear-mark every cent of government spending (the entire phenomenon of “mandatory spending” is a conceit, all spending is really discretionary and can be ended if necessary), and release budgets that fit their expenditures within the contexts of a balanced budget. If politicians want to increase spending on certain programs. Fine, but they have to show either what other programs will be cut or how they will be taking more money from the people they represent. Anything less is not only a failure of accountable government, but also a failure to ensure that citizens truly know the costs of their government.
The Public Debt as a Turkey Problem
Why does this graph matter? It matters because the upward trend in spending has not been matched by a similar upward trend in revenue, as shown by the graph below from the Congressional Budget Office:
The Congressional Budget Office has a projection until 2024, but that shouldn't be given too much salt. As Nassim Taleb quips in The Bed of Procrustes, "For the ancients forecasting historical events was an insult to the God(s); for me, it is an insult to man - that is, for some, to science."
The Federal deficit is one big Turkey Problem. People take evidence that the trend has continued from Eisenhower on as evidence that the trend can last forver, falling victim to the classic problem of induction. At least the Congression Budget Office addressed that the continuing deficit reduces the Federal government's possible set of options when it comes to facing future crises:
Surrounded by the dark forces of time and ignorance, the best we can often do is not to predict future crises, but to put ourselves in the position of rising to their challenge. After all, if future history were certain than it would have already happened. The Federal debt ties the Federal government to certain promises which reduce its options for the future, and by doing so it makes the Federal government fragile to unexpected change.
Adaptability is the key to success in a world like ours, and the deficit robs our government, day by day, of the adaptability it may need in the future. The shame is that, the Congressional Budget Office's forecasts to 2024 notwithstanding, we won't know what we need to be adaptability for until it has already happened.
Posted by Harrison Searles on 02/12/2014 at 02:40 AM in Budgets, Commentary, Current Affairs, Nassim Nicholas Taleb, Politics | Permalink | Comments (0)
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