Deficit Reduction-A Modest and Conservative Proposal

A common Republican theme is the need to reduce the Federal deficit. In fact, they were willing to shut down the government and default on our financial obligations over the issue (at least that became the big stalking horse after the “defund Obamacare” ran out of steam.

Deficit reduction should be a priority—but a long term one. Keynesians  argue that governments (including central banks) should be counter-cyclical to the business cycle. Austerity in boom times-deficits in recessions.

But the Republicans have proved very poor stewards of the economy. They squandered the surpluses inherited from the Clinton boom years in ill-conceived tax cuts while launching wars (kind of reverse war bonds). They left the economy a smoking hole in the ground at the end of the last Republican administration.

Now, in times of recession and slow-growth recovery, they are insisting on government austerity. They believe this, in spite of very recent experiences in Europe. Go here for the Irish experience. Other countries in the Euro zone had (or are having) very similar experiences. It is Bizzaro World economics.

It is hard to imagine why they are not only so insistent on fixing the deficit right now, but why they are so obsessed with it. Inflation in the economy is 1.7% (below the Fed’s target of 2%) the US dollar is still the world’s reserve currency, and most of the debt is owed to ourselves. And any speculation of moving away from the US dollar as the word’s reserve currency is motivated, not by our deficits, but because of the crisis-to-crisis management of our economy caused by Republicans.

But there is a way to satisfy the Republican obsession with immediate deficit and not ruin the economy. This is an appeal to the right-wing core beliefs of superiority of the self sufficient, paying your own way, and their natural disdain for what Mitt Romney called the “47%” in the last election.

There are some States that pay more in Federal taxes than the benefits they receive. Lets call those the Maker States. On the other hand, there are some States that receive more in Federal benefits than they pay in Federal taxes. Lets call those the Taker States. There a total of 18 Maker States that are paying the freight for the Taker States. Traditional Republican thought would hold the Makers in high esteem, and the Takers would be regarded with disdain.

So, let’s start with the premise that the Maker States should be in charge. That should be an idea that the Republicans should love.

One idea is that Federal spending should be reduced across the board in the Taker States until all States contribute at least the amount of the benefits they receive. The advantage to this is that it would result in an immediate and dramatic reduction of the Federal deficit. The problem with this idea is that it would further impoverish the Taker States and perhaps condemn them to a permanent, welfare class. The goal, after all, it is to take all the Takers and turn them into Makers. The elimination of Social security payments, Medicare supports, SNAP assistance would hurt only the already poor. Elimination of farm subsidies and defense contracting would hurt the already rich.

Another, more compelling idea is this: Only the Representatives of the Maker States could cast votes in Congress. The Taker States could still send their Representatives to Congress, they could still make speeches, sit on Committees and press their cases. They just could not vote.

What could be more conservative than that? Only the ones paying the bills get to decide stuff.

But here’s the rub for Republicans: It turns out that 17 of the Maker States are Blue (they voted for Obama in the last election). Only one is Red (voted for Romney in the last election). Most of the Representatives and Senators who are in a dead panic about the deficit are from Taker States.

A reconfigured voting Congress would like this (presented in order of relative fiscal contribution to the nation):

The immediate advantages to this are apparent:

1. The number of votes in the Senate to break a filibuster would be 22. Problem solved.
2. The grown ups are back in charge and partisan gridlock disappears. This Congress wishes to raise the debt ceiling or extend unemployment benefits, or not default on our obligations, then they have the power to do it. After all, who is paying the bills?
3. If the Taker States want a voice in the affairs of the nation, it will become obvious quickly that they need to unshackle themselves from the Tea Party and the Religious Right. They would have to stop spending so much time and energy on inconsequential issues like gay marriage, women’s right to choose their own health care options, and easing gun control laws. They could either focus on economic development so that they can get their economies into a Maker status (this is the key to deficit reduction) or they continue as wards of the State, forever imprisoned by the Tea Party.

It is hard to know what the Takers would choose. My hope is that rationality would prevail.