How to Succeed in Sounding Impressive When Talking about Budgets and Deficits Without Really Trying: Understanding the Degraded Media Environment When It Comes To Reporting and Discussing U.S. Budgetary Matters

Posted in: Tax and Economics

Suppose you are not particularly well versed in economic policy issues, and you have only a passing familiarity with basic concepts that are relevant to the U.S. federal budget.  Should this stop you from trying to write with great authority about debt, the deficit, spending, and all of the other issues on which so many people fearlessly state their unfounded opinions?

Luckily for you, ignorance has proved to be no barrier to people’s writing with confidence about budgetary issues.  And the best news of all is that you do not even need to do any real work to join their ranks.  Armed with only a few bits of conventional wisdom, and just the right air of world-weary authority, you too can soon say meaningless—yet somehow damaging—things about our budgetary politics and policies.

Even better, it does not really matter whether you will be writing from the position of a news reporter or a commentator.  You will be encouraged to take unfounded and openly biased positions, even if you are supposedly not an editorialist, so long as you take the right unfounded and openly biased positions.

When it comes to budgeting, as The Washington Post’s Ezra Klein pointed out earlier this year, reporters have long since thrown off any pretense that they are neutral about budget policy.  They do not even think that they should be neutral.  The Beltway-insider conventional wisdom is taken to be presumptively true.  As a result, the reporting is not concerned about the following key questions: “What are the pros and cons of various approaches to government spending and taxes?” Instead, they are concerned only with this question: “Why do politicians fail to do what every right-thinking man, woman, and child knows is good and right?”

The good news for an aspiring budgetary pseudo-expert, therefore, is that there is a ready audience for anyone who is willing to write what every other insider already thinks is true.  The bad news, of course, is that this conventional wisdom is completely wrong, and our economic fortunes are only going to get worse as Congress finally turns its attention this Fall to the tasks of passing the laws that are necessary to fund the government, and of increasing the debt ceiling.

The Conventional Wisdom on Budgeting: How to Sound Sagacious and Worried About Problems That Never Existed, or that Have Already Been Solved

Although readers of this column surely are familiar with the basics of the conventional wisdom about deficits, it is instructive to describe the basic elements of the received truth.  Understanding what constitutes the conventional wisdom can allow us to expose how dangerously uninformed it is.

As Klein described it, news reporters regularly equate doing “the right thing” with cutting “entitlements”—Social Security, Medicare, and Medicaid.  Of course, the reason that it is supposedly necessary to do those things is that there is supposedly a long-term deficit crisis that everyone knows is going to happen.  Once everyone has agreed that there is a long-term problem, the ever-so-serious argument is that something must be done right away, because responsible people should never, ever put off until tomorrow what they can do today.

Fortunately, every aspect of the conventional wisdom on budgetary policies is either wrong or grossly exaggerated.  That means that the idea that we must act now to fight an inevitable crisis—which, the conventional wisdom insists, we must do by harming middle class and poor beneficiaries of successful government programs—is simply wrong.  That should be good news, but there are so many people who are committed to the idea that sounding smart involves decrying deficits and “runaway spending” that they refuse to believe the good news that is staring them in the face.

Moreover, it is not merely the pundits, reporters, and outright hacks who buy this dangerous worldview.  The power of any conventional wisdom is the hold that it has on respectable opinion, such that people with only passing familiarity with an issue quickly absorb the standard view without even realizing that they have done so.  This results in well-meaning thinkers parroting the frantic claims of the budget-obsessed pundits.

For example, in the abstract for a recent academic article, an excellent young law professor referred casually to “the massive fiscal crises that the federal government is now experiencing.”  The article itself (which considers how best to design tax laws to improve compliance) would be just as important and interesting no matter what the federal budget situation might be.  However, because “everyone knows” that there is a massive fiscal crisis, the author felt (understandably) comfortable taking it on faith that there really is a fiscal crisis, and that the crisis is happening right now.

Similarly, at a recent academic conference, I listened as another promising younger scholar described a research project.  After explaining the actual project, he then confidently commented that Congress had “kicked the can down the road—again” when it came to the federal budget deficit.  He then wondered aloud why it is so difficult to get Congress to face up to the oh-so-obvious need to bring deficits under control right away.

Again, we are fortunate that there is no truth behind the presumptions underlying these statements. It is certainly worrisome that reality does not penetrate what everyone thinks they know, but the fact is that the latest official budget projections show that the situation in the United States is quite sustainable and stable.  That is, even if you are a person who believes in the false notion that budget deficits are per se bad, you should be pleased by what you see, and should not be complaining about Congress’s failure to make “tough decisions.”

The first key to understanding what is really going on is that there was never a reason to worry about the short-term situation at all.  When budget deficits rose precipitously after the onset of the Great Recession, it was obvious that those deficits would come down again, and that they would fall rather quickly if we allowed ourselves to fight the recession with aggressive fiscal policy (that is, temporarily increasing deficits).  More debt in the short run would lead to more growth, and to more easily manageable debt in the future.

Because we did not take decisive and adequate action, and we therefore needlessly doomed millions of people to unemployment, foreclosures, and misery, the elevated levels of deficits lasted longer than they should have.  Even so, enough time passed, with just enough economic stimulus being provided (including help from the Federal Reserve) that the situation has now stabilized.  While the deficit topped out at 9.8% of gross domestic product (GDP) in 2009, or $1.4 trillion, that number has fallen every year, so that when fiscal year 2013 ends, the deficit is projected to be less than half of what it was at its peak.  Specifically, the 2013 deficit will be about 4 percent of national income ($642 billion).

Moreover, the standard ten-year range for budget projections shows that deficits are likely to drop to as little as two percent of national income in 2015, and the average deficit over the next ten years will be less than three percent of GDP.  Deficits at that level are easily sustainable for the indefinite future.  Indeed, deficits at that level are (depending on whether we undertake adequate public investments in things like education) wiser than trying to balance the budget every year.

So, at a bare minimum, we know that there is not an immediate crisis, extending out for at least a decade.  But if my younger colleagues, or anyone else, were to try to get into the business of opining about the federal budget, they would not be penalized for being completely ignorant of these facts about current and medium-term budget deficits.  Indeed, if they were burdened with such knowledge, and they felt compelled to form their opinions on the basis of facts, rather than what they are supposed to think, their budding careers as budget scolds would suffer.

The Longer-Term Picture, Health-Care Inflation, and the Debt Ceiling: Why Let Facts Stand in the Way of a Good Story?

But surely, one might argue, a sensible and sober budget analyst cannot merely look at a ten-year window and call it a day.  Is it not true that the scary stuff is several decades down the road?

It is certainly true that the longer-term picture is an important part of the story.  What is no longer true, however, is that the long-term picture justifies a call to arms.

Until a few years ago, it was at least sensible to argue that the long-term deficit situation would truly become out of control, if the consensus estimates of health-care inflation turned out to be true.  Even then, as I have argued frequently, the issue was not deficits, but health-care costs, because those long-term projections of health-care inflation made it clear that the economy simply could not survive decades of excessive inflation in medical costs.  It was not just the federal deficit that would suffer, but every family, every business, and every state and local government.

The conventional wisdom, therefore, was not even right about the long-term problem facing the economy.  It was not deficits, or government spending in general, or even the vague notion of “entitlements” that threatened long-term prosperity.  It was the medical-industrial complex, which was consuming more and more of the economy’s resources over time.

As I pointed out in a Verdict column earlier this year, however, even that story is no longer true.  Although there is still plenty wrong with our health-care system, the unsustainable increases in health-care spending have, over recent years, moderated in ways that cannot be explained merely by the economic slowdown.  We are still wasting a lot of money on our inefficient (and often deadly) health-care system, but at least it is no longer true that health-care inflation is on a permanent path to causing our economic destruction.

Again, however, plenty of pundits and news reporters make very good livings writing about deficits and government budgets without ever having come within shouting distance of any of these facts.  If one is not calling for action now, one will soon be booted out of the club.

Even if an aspiring commentator allows herself to acknowledge the new forecasts regarding health-care costs, moreover, it is still essential (to remain in good standing with the keepers of the conventional wisdom) to argue that the situation could get worse at any minute.  Indeed, one should even argue that good news is bad news, because it is going to cause people to be insufficiently savage in their budget cutting in the future.

In fact, as Paul Krugman has recently pointed out, it is not even enough to argue that the deficit needs to be “tamed.”  If one truly wants insider status, it is also not acceptable to applaud a country like France, which has closed its budget deficits partly by increasing taxes.  What has long been implied is finally being exposed to the light of day: The supposed concern about budget deficits and debt is actually a cover story for an attack on government’s role in providing insurance against medical catastrophe, and its role in guaranteeing a dignified retirement for everyone who has worked throughout their lives.

Possessing no expertise or knowledge about budgeting, believers in the conventional wisdom nonetheless all understand that “serious” budget analysis means attacking Social Security, Medicare, and Medicaid (and rejecting tax increases as “politically unrealistic”).

And as an added bonus, they can also ignore their own ignorance when discussing the upcoming negotiations over the government budget and the debt ceiling.  Even though there is an enormous difference between a government shutdown and a debt ceiling-induced default, every safe commentator simply lumps the two together.  At that point, the only thing for an insider to do is to call on all responsible politicians to agree on a middle ground (of spending cuts for the elderly and the poor, of course) that would prevent any of those bad outcomes.

It does not matter, it seems, who is holding the economy hostage, but only that bad things might happen “because the government needs to get its spending under control.”  That is simply not an accurate way to think about the situation, but it is what supposedly sober and realistic commentators and reporters know that they are supposed to think.

A would-be media budget “expert,” in order to be taken seriously, must navigate all of these requirements.  The title of this column suggests that it is possible to do all of this “without really trying,” but perhaps that is not quite right.  It might well require extreme efforts to remain ignorant of reality.  Trying not to be well-informed about budgetary realities, however, is not exactly hard work.  And it certainly never cost anyone his or her job.

Posted in: Tax and Economics