Six friends walk into a restaurant and order a lavish meal. As the dinner comes to an end, it becomes obvious: It's going to cost a lot more than anybody budgeted, well over $600.
One early bird rises before dessert, peels off a $100 bill, tosses it on the table. "That should cover me," he says – and races for the door, leaving his pals to sort out the rest of the payment scheme.
Have you ever been in this situation? If so, congratulations: You're well prepared for American politics over the next five years.
As everybody knows, the country faces a huge mismatch between its obligations and its projected income. One way or another, the disparity will have to be resolved. That reckoning will inevitably lead to the disappointment of some people’s expectations. But whose?
That’s the fight that has been underway for two years.
President Obama's 2009 stimulus plan attempted to protect the expectations of state and local government employees by funding state governments to avoid budget cuts. Then the stimulus funds ran out… and the layoffs began. Now state and local governments are feeling the shock of adjustment, with probably more shocks to come.
The December 2010 battle over the extension of the Bush tax cuts was a battle over the expectations of taxpayers, especially upper-income taxpayers. They got a two-year stay of execution — with a threat from the president to return to the issue in the 2012 election year.
Paul Ryan's budget opens a huge, angry front in the battle over future expectations. People under 55 would progressively receive less and less generous retirement benefits in the years to come. People who rely heavily on tax deductions and tax credits would pay more taxes. Meanwhile, people with large incomes would not only escape the burden of adjustment, but actually emerge ahead of the game. Or anyway — they will try to.
The battle over monetary policy is likewise a battle over the burden of adjustment. Today, the Federal Reserve is printing lots of dollars. That has not caused inflation at home, but it has contributed to a reduction in the dollar’s purchasing power on world markets. Who loses? People who own lots of dollars. Some financial types and journalists urge a tighter monetary policy to raise the value of the dollar on the world market. That would enhance the purchasing power of those who own lots of dollars — and would cast the full burden of adjustment on those cast out of work at home.
One way to deal with these adjustment problems is to force everyone at the table to stay until the bill is presented, and then participate in a discussion over how to divide the bill most equitably. Maybe everybody should pay the same. Maybe those who did not drink wine should pay less.
For now, however, all parties are trying to do what my hypothetical diner who tossed the hundred tried to do: Gain an advantage by moving first and faster than anyone else.
The trick does not seem to be working — the bill’s coming due — and if we don’t agree on some way to pay before the U.S. crashes into its final debt limit in early August, our punishment will be a lot worse than washing dishes.
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