Friday, June 24, 2011

A Quick Though Exercise: Applying Government Logic on a Micro Level

Listening to Tim Geithner try to explain how raising taxes is necessary in order to preserve the current size of government was enough to give me a headache. It's like watching someone try to explain to you that the Earth is flat. This fictional person isn't lying; he really believes the Earth is flat. No amount of explanation on your part about mercator maps and telescopes and space shuttles taking pictures and nobody having ever fallen off the edge of the Earth into deep space will convince him otherwise. He just answers in a sanguine fashion, "Yes, I understand all that. But back to my point. The Earth, being flat..."

Geithner (and most of the current administration) appear to take the following as givens:

1. The deficit is unsustainable.
2. Government must not be made to shrink.
3. QED, taxes must be raised.

That may seem an oversimplification, but watch the video at the link above. Geithner says,
"If you don't touch revenues and you leave in place the tax cuts for the top 2% that were put in place by President Bush, if you leave those in place, and you're trying to bring our deficits down over time, then you have to do exceptionally deep cuts in benefits for middle class Americans and you have to shrink the overall size of government programs, things like education, to levels we could not accept as a country."
The problem is, there is no level of cuts that don't get attacked with words like "draconian" any time they are proposed.

The list above could be more broadly deployed thusly:

1. There is no problem that government can't fix.
2. There is no problem that can be fixed by shrinking government.
3. QED, taxes must be raised.

Look at Geithner's argument: we can't shrink government enough (in his opinion) to deal with the deficit. So rather than spend less money, we need to keep more of the money that workers earn. How that is supposed to stimulate the economy I will never understand. But let's do a quick thought exercise:

Frank is unemployed. He hasn't held a steady job in over four years. He gets one just long enough to requalify for unemployment benefits then leaves. He has a cell phone with a nice data plan, a computer, a nice car, cable TV, and all sorts of other amenities.

One day he realizes that his unemployment benefits aren't going to cover his rent, cable, cell phone, car payment, and his active lifestyle (he likes to go to bars). Frank has two choices: he can stop going out to bars, get rid of his cable, maybe sell his car for something cheaper, get a cheaper cell phone plan. Or, he can go to the unemployment office and say, "I can't get my spending in line without exceptionally deep cuts in my lifestyle to levels I could not accept as a layabout. You need to give me more money to cover my bills."

Tim Geithner and the current administration are Frank.

(Crossposted at Say Anything)

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