It should be a truth universally acknowledged that America's fiscal deficit requires urgent reduction. It should be, but it isn't. Instead, abetted by the insufferable arrogance of those who claim that the current deficit is a low priority, my generation faces a terrible plight. Like Atlas shouldering the celestial sphere, we will, without action, be left to struggle under an insurmountable burden. Whether to avoid a debt-saddled future or a recession induced by market panic, logic demands that we cut spending now.
With politics being the art of the possible, we need austerity to win bipartisan support. And if you clear the discourse of demagoguery, and look at specific programs, it's clear that there is an austerity program that both parties can get behind.
On the Left, austerity is toxic, almost synonymous with economic cataclysm. On the Right, austerity is a necessary evil — an unpleasant prescription for a fiscal crisis. The dispute has been further calcified by falling into the familiar Left-Right divide on whether government spending is good or bad.
But the normal Left-Right divergence needn't apply, as long both sides drop their wrong-headed preconceptions about austerity. Government spending is neither simply good nor simply bad — it's both. For example, it's a basic economic truth that some government outlays are good for the economy. It's pretty uncontroversial to argue that high-capacity highways, metro systems, and airports increase business productivity and propel dynamics of growth. Similarly, good schools equip students with the skills for economic success. Conversely, it's also clear that some government expenditures waste scarce resources. Bridges to nowhere, union patronage, and corporate cronyism are three such examples. Using Manichean labels for spending serves no one.
We must also remember that the European austerity experience offers lessons as well as warnings. Failing to address the welfare states which are at the heart of their fiscal problems, European governments have focused on broad spending cuts. Unemployment remains entrenched and capital flows are still sluggish. We can do better.
We need to target austerity at unproductive spending. While we need to eliminate pork and patronage, those alone won't be enough. To succeed in our hybrid austerity program, we must rid ourselves of the market distortions that we currently embrace.
A few ideas?
We should cut the farm subsidies that cost us billions and offer little in return.
We should end the Ponzi scheme of federal biofuel subsidies. Only Iowa benefits from this deficit-driving lunacy. And while Iowa feeds at the trough, the rest of us endure higher food prices.
We should enact medical malpractice reform. Encouraging tort lawyers to ruin careers in pursuit of greed is neither moral nor economically logical. After all, our insurance premiums — including those paid by the government — reflect the insane insurance coverage that doctors require.
We should pursue greater Medicare cost equilibrium. Two procedures of the same nature should not have a cost divergence in the thousands of dollars. This is a reform that would preserve patient care while also saving tens of billions of dollars.
We should liberate states to play a greater role in the provision of Medicaid services to their citizens. Local power is more responsive and more efficient.
At the individual level, we should tax employer-provided health care as a fringe benefit. Until all Americans have a level playing field when it comes to health care and taxation, we will continue to suffer the fiscal afflictions born of an absence of personal responsibility.
Certainly, the above proposals won't go anywhere near what will be needed to address our long-term deficit problem. What they do offer though, is a start. An austerity program that begins to address our deficit problem, helps our post-recession recovery, and avoids destroying our military under the sequester hammer. Austerity that recognizes young Americans deserve more than a future of debt servitude. Austerity that is not only worthy, but also capable of winning of bipartisan support.