In my previous three posts analyzing the June 26th AmericaSpeaks Community Conversation event I attended in Falls Church, VA, I presented the steps in the decision process used for the event, and discussed the pre-conference phase and the first four steps. These reflect a strong and consistent bias toward socializing participants into the idea that there is a deficit problem and that it has to be treated by cutting expenditures and/or raising taxes. The bias was reflected in many little ways in the materials used for the meetings and in the way the first four steps were carried out. The framing of exercises in the decision process continually restricted choices to ones that bring participants back to the supposed problem of a deficit and debt crisis. The web-streamed talks about national conference proceedings and orientations, and the brief constricted discussions of major values issues all worked to fit participants’ thinking to the ideas and frames presented in worksheets and the Federal Budget 101 presentations. Lines of discussion that would have led outside of the intended framing were politely aborted by the facilitators, pleading limited time, and the need to get through the agenda, and give everyone a chance to speak, so that any person developing counter-themes to the major narrative did not have a chance to develop these counter-themes and counter-narratives in the context of the supposedly unbiased process. In this post I’ll continue with my examination of step five of this process.
Working through the Options Workbook and arriving at decisions about what cuts in Federal Expenditures or tax increase to make in order to cut the projected Federal Budget. Reporting to the group about the choices made by each participants and something of the reasoning behind these choices. Summing up by facilitator highlighting the most popular choices of options for reducing the deficit.
The options workbook continues the process of fitting participants to the framing of AmericaSpeaks. The introduction says, in part:
”This workbook is designed to provide a wide array of revenue and spending options for reducing the federal budget deficit. These options represent the types of decisions facing policy makers and their implications for the American people, although they surely do not encompass all of the options that policymakers could consider. Participants in the national discussion will have the opportunity to add additional options as part of the process . . . .”
And later it says:
”Your challenge is to focus on the year 2025, when the annual deficit of 9% of GDP will translate into $2.46 trillion, and choose spending or revenue options, or both, to reduce it by $1.2 trillion. The year 2025 is a good one on which to focus – it is far enough into the future to show how much the gap between projected revenues and spending will widen, but not so far as to seem unthinkably far away.”
And a bit later:
”Reducing our deficit to a sustainable level is a long-term challenge that will not take place all at once. When our nation last eliminated its annual deficits in the late 1990s (smaller than the deficits of today), our leaders had to repeatedly cut spending and raise taxes in order to turn those large deficits into record surpluses.
”In that spirit, we will ask you to choose a series of policy changes that begin to take effect in a few years – after the economy has fully recovered from the recent recession – and that will significantly reduce the deficit by the year 2025.
So, that’s it. The task for us was to choose options for reducing spending, or raising revenue, by introducing new taxes or changing the tax structure, in order to reduce the projected 2025 deficit by $1.2 Trillion. We could choose any of 42 options to do this, and theoretically we could add new options. But in my community conversation, it was difficult to include any additional options. When they were introduced there was no space for them on the sheet provided to record the choice of options. There were no blank lines on “the scorecard” where a participant could name an option and put a savings number on it, so that others in the group could become aware of the option and vote on it themselves. It would have been easy to provide additional space on the scorecard to make it easy to add new options. But since this wasn’t done by AmericaSpeaks, it’s not surprising that not a single new option was included in the final results that were going to be reported to AmericaSpeaks. New options were listened to by the facilitators in the conversation I attended, but they were not acted upon. It was as if they didn’t count.
On the specifics, in my own community conversation, many people were dissatisfied with the choices provided in the list of options. One person suggested 50% cuts in defense spending for example, while the workbook provided for a maximum of 15%. Another suggested that for purposes of FICA taxes all caps on earnings be removed, while the workbook proposed caps including only 90% of wage earners.
Also, the options workbook community conversation made much of the four categories in which options for spending cuts were presented fell: Social Security. Medicare and Medicaid, non-Defense spending and Defense spending. However, a fifth category, interest expense, which was 21% of the 2025 projected expense summary was very conspicuously left out of consideration. I repeatedly suggested that money could be saved by stopping debt issuance, and pointed out that this would save roughly $1.4 Trillion, almost all Federal interest expense in 2025, meeting the “challenge” with only this one change. But my proposal wasn’t included as an option for people to vote on or discuss along with the other official options.
Nor, again, was a sixth category of options on “growing our way out of the deficit” included in the options workbook. The Federal Budget 101 booklet and video both discouraged this idea by saying that most experts on the economy thought it was impossible to do that. Nevertheless, the dismissal of this as a category of options was peremptory and shows a clear bias. First, because all economic experts don’t agree on whether it’s possible to grow our way out of projected deficits, and historical data shows that there is every reason to believe that we can. Second, because “most experts” have been wrong about major aspects of economic forecasting very frequently in our history, and they are quite likely to be wrong again this time. Third, whether we can grow our way out of the deficit is not an all or nothing question, or, at least, phrasing it that way glosses over the issue of how much of the projected deficit we can grow our way out of. If the challenge is to save $1.2 Trillion by 2025, perhaps this can be achieved by cutting $600 Billion in interest expenditures and raising $600 Billion more in tax revenue by growing the economy, for example, without changing anything in the remaining categories. Or alternatively, if we saved $1.4 Trillion on interest expense, and increased revenue by $1.1 Trillion with growth-oriented and full employment policies, that would create a projected surplus in 2025. This shows that any substantial amount of additional revenue that might be raised through policies that will facilitate growth between now and 2025 is just as important, and perhaps more important in reducing projected deficits, as savings and revenue raised in the categories included by AmericaSpeaks included in the workbook and in the meetings? Could it be that AmericaSpeaks isn’t interested in having its participants consider full employment policies because its major financial supporters prefer policies that remove all possibility of demand-pull inflation regardless of the effect such policies have on working people
What about the selection of 2025 as the target date for option selection? AmericaSpeaks claims it selected 2025 because that year “. . . is a good one on which to focus – it is far enough into the future to show how much the gap between projected revenues and spending will widen, but not so far as to seem unthinkably far away.” In other words, 2025 was a good year because AmericaSpeaks’s projections show a very large deficit that will persuade people of the seriousness of the deficit problem, yet it’s not so far off in time, that people would say why worry about this now. Does this choice indicate bias? I think it does, because there’s a very good reason to have selected a date that is much more proximate in time.
That reason is that a projection of deficits 15 years out is certainly going to be subject to huge errors. CBO knows this because it doesn’t even claim reliability for its ten-year projections, much less for any 15 year projections based on them. On what basis does AmericaSpeaks think that its own projections of expenditures and revenues for 2025 which are just extensions of CBOs are at all realistic. Has CBO even been able to accurately project 3 years out? If the answer is no, as I think it is, how can we accept the projections provided to participants as anything but very bad science fiction? But the issue here, is not even the unrealistic nature of the projections 15 years into the future. Rather it is that AmericaSpeaks, did not warn participants about that unreliability, and provide alternative projections that might be just as likely for 2025. I’ve talked about an alternative here. Why didn’t AmericaSpeaks talk about alternatives and let participants discuss them during the proceeding?
Perhaps the most important aspect of bias in the options workbook and ensuing discussion, and in the whole design of the decision process, was excluding the topic of whether an activity aimed at choosing revenue raising or spending cut options for the purpose of reducing the deficit is a legitimate exercise at all? In not asking this question, AmericaSpeaks is implicitly taking a policy position. It is saying that an important aspect of Government activity must always be to manage the deficit, the national debt, and the debt-to-GDP ratio and that this is the meaning of fiscal sustainability and fiscal responsibility.
However, there is a counter-position to that policy position. It is that for a government that is sovereign in its own non-convertible fiat currency, in the sense that it has the constitutional authority to issue an unlimited amount of it without the need for any commodity backing and also that it has no external debt in foreign currencies, there is no solvency risk from the simple fact of Government expenditures, and no Governmental Budgetary Constraints (GBCs) that are not self-imposed, beyond constraints that arise from the effects of Government Spending such as employment levels, economic growth, price stability, environmental and climatological outcomes, national security outcomes, education outcomes, etc. The deficit, national debt, and debt-to-GDP ratio are not important in themselves, and should not be viewed as policy concerns or policy targets. They are not indicators of anything that ought to be managed, or constrained, or otherwise influenced. They are a distraction from the real issues which are the real outcomes of Government spending such as those listed above.
This policy position was not considered in the supposedly neutral, non-partisan, and unbiased decision process run by AmericaSpeaks. Had it been considered, the option conversation wouldn’t have been about options for reducing the deficit in 2025. Instead it would have been about options for creating a new economy by 2025, and options for creating greater equality of opportunity in American society, or options about creating a new energy foundation for our economy. In other words, it would have been an entirely different conversation. And its message for The National Commission on Fiscal Responsibility and Reform would have been:
“Fiscal Responsibility is about Government spending money and taxing to create good outcomes. In recent years, the Government of the United States has spent and taxed in such a way that it has benefited a relatively small proportion of Americans and disadvantaged almost everyone else. You are viewing your job as one of figuring out how we can meet certain debt-to-GDP ratio targets by reducing deficits and perhaps even reducing the national debt. This is not fiscal responsibility. It is fiscal irresponsibility. What you need to be doing, instead, is examining Government programs assessing their impact and making recommendations to expand those that are achieving public purposes, and you also ought to be considering new policy options that are likely to achieve public purposes. The test of fiscal responsibility is whether Government is achieving public purposes. Not whether it is meeting some abstract standard, ungrounded in any coherent economic theory, about what level of public debt-to-GDP ratio ought to be maintained. Here are some options we have come up with to help recommend new options.”
And then the options most frequently chosen by meeting participants should have been listed, along with other less popular options emerging from the meeting.
That’s enough for now. In my next post, I’ll continue analyzing step 5 and particularly the specific options in the options workbook, to reveal the biases used to try to fit the participants in the AmericaSpeaks meeting to the deficit reduction purposes of the meeting designers.
(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).