Wednesday, June 23, 2010

PS427: The Anti-Stimulus, State Responsibility and WFA

Ezra Klein at the Washington Post is an interesting journalist with a wonkish policy focus. This week he published a piece on state budget problems as the "anti-stimulus", amounting to a huge amount of money not being spent that can equal or even exceed the size of the federal stimulus package.

See his article here.

Some reader's subsequently object (quite correctly) that federal aid to the states amounts to enabling their bad budget management and just encourages them to delay confronting the basic shortcomings of their budgeting. Klein raises that issue and presents some counter evidence, along with a link to an academic analysis of the state budget short fall and its roots in unemployment levels:

That link is here.

And finally, what are the roots of government (state and federal) deficits and can't they be readily cured by eliminating Waste, Fraud and Abuse (WFA). The public seems to think so. See this piece by Democratic pollster Mark Mellman.

Link to opinion about WFA here.


Is Klein's empirical argument one that both lefties and righties should (in principle!) be able to agree on, even if they differ on policy solutions? Or is there an underlying ideological debate about the fundamental point Klein is making, which means that no such empirical agreement is possible?

What role do you think public attitudes play in state and federal efforts to address budget deficits and revenue?

Why does the public continue to believe that such large portions of government revenue is wasted and therefore could be cut without any consequence?

If it is so easy to do, why has NEITHER party made significant headway in cutting spending? (Consider the record of the 1990s and the federal surpluses that resulted as both a positive and a negative example.)


  1. In my own office, I receive a good number of calls a day specifically geared towards the issue of federal government spending. People are extremely frustrated with the notion that Congress and the President are mortgaging our future economic prospects by assuming massive amounts of debt. This, unsurprisingly, weighs on the mind of Congressional members constantly. The public attitude ultimately affects a politician's judgment because they are in essence the boss who conducts the member's performance review on Election Day.

    No matter the ideological affilation, nearly every politician can agree that this anti-stimulus is a strain on the US because it makes us economically weaker. This weakness can be attributed to one dollar being borrowed now having to be accounted for somewhere down the line. No one truly wants to borrow more money. However, the dire situation we see ourselves in requires to swallow our reservations. As a believer in Keynesian economics, the economic contraction we are in demands capital to be corrected. However, one thing that needs to happen is the cutting of certain spending during financial progression. Unfortunately, in good times this creed is rarely adhered to because politicians' actions are not as heavily scrutinized.

    The reason the public sees goverment waste at 50% is a problem. It inherently supposes a lack of faith in the institutions which are meant to help us achieve a greater societal well-being. In fact as Ezra Klein noted, we always hear stories of waste, fraud, and abuse but rarely do we see the good ramifications of tax use. My personal theory is that we focus on WFA more because each and every member of society could have benefitted from the money lost. Whereas worthy uses of tax money usually do not help every single citizen. Not to say that everybody cannot benefit, but most programs are geared toward one specific group. For example, Medicare and K-12 education spending are appropriated for the welfare of the elderly and kids roughly 5-18, respectively. Thus, not every citizen perceives a direct benefit in the interim and instead focuses on WFA because that always negatively affects the whole.

    Party progress towards cutting spending has been lacking because usually the appropriations are compulsory and out of their immediate control. A large portion of the federal budget is geared towards spending that's already been decided like Social Security or subsidized health insurance. These committments have already been made. A good breakdown of the federal budget as follows:

  2. I think that in principle Klein’s argument is one that lefties and righties should be able to agree on. Higher taxes and layoffs are two things that everyone can agree are not good things. However, I think the disagreements will begin when assuming that both lefties and righties would trust the states to run deficits. I think right leaners would be inherently skeptical of trusting state officials to drive a deficit in this financial environment. While Klein argues that the federal stimulus effectively covered up state contraction, rights would be hard pressed to let the states fall into deficit while spending federal stimulus money. I don’t think that an agreement could be made on the fundamental idea of allowing states to run heavy deficits while helping unemployed numbers.
    The public's attitude on budget deficits and revenue is hugely important as well. Be it the failure of many bureaucracies or the manipulation of the media and talk radio, the public has it’s doubts about government spending. The emphasis and obsession on pork barrel spending and other wasteful programs magnifies the idea of waste, fraud and abuse. These conditions have created a ballooned idea that cutting WFA is as simple as auditing the books, as the govinator thought. I think neither party has made significant headway in cutting spending because any budget cut effects large groups of people who ask, “why us?” Cutting spending usually hurts one large group of the public and with the idea that huge programs of waste, fraud and abuse lay uncut, it becomes even more unpopular than budget cuts already are.


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