Tuesday, July 26, 2011

The amount of attention being paid to the current negotiations in Washington DC over the debt ceiling simply baffles me. Granted, if the US government really defaults on its obligations, then the consequences could well be quite severe. But there's no significant chance of that happening--the political risks for all the participants are simply too great. And once that danger is discounted, the negotiations are reduced to nothing more than a large-scale, high-stakes form of bazaar haggling.

Even more ridiculous, though, is the meticulous attention paid to the ten-year projections that accompany each side's proposals. (The projected budget changes--whether cuts or tax increases--attributed to the various plans are always expressed as cumulative over ten years.) For one thing, these numbers depend heavily on economic forecasts that are inevitably off the mark, as often as not by wide margins. For another, the tax rates and expenditures they represent are constantly being tinkered with over time, and could change radically with the next big overhaul of the tax code, one or another major entitlement, or various discretionary programs. Just off the top of my head, for example, I can think of major tax rate changes enacted under every US president since Reagan, and major entitlement program changes under those same presidents, with the possible exception of George H.W. Bush. Thus the likelihood that any of the figures being bandied about will even come close to predicting actual government spending or revenue in any category is simply a fantasy.

Why, then, are these numbers seemingly taken so seriously? My best guess is that they're symbolic of the participating politicians' commitments to their coalitions and constituencies. Republicans are taking a hard stand against tax increases and in favor of budget cuts as a way of demonstrating that they won't betray their supporters--largely white, middle-class blue-collar and small-business voters. Conversely, Democrats, by their adamance in favor of larger tax increases and smaller budget cuts, are demonstrating backbone to their supporters: white-collar professionals, government employees and ethnic/racial minorities.

This show of backbone is particularly important because times are hard, and fear is a much stronger motivator than greed. To a typical voter, a politician who's happy to meet an opponent halfway appears more likely to trade away that particular voter's politically-obtained benefits or advantages, than a politician who will go to the mat on a completely arbitrary debate over a few hundred billion fantasy dollars in a meaningless projection. So each faction blusters and threatens, for fear that its supporters will abandon it as weak and fickle if it dares appear too ready to compromise.