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The Procrustean Democracy of AmericaSpeaks: Part Two

letsgetitdone's picture

In my first post 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 then began a discussion of the steps. I broke off my account in the middle of my narrative of Step Two.

Primary Facilitator states the purpose of the meeting, reviews the agenda, and hands out materials for the event, including a pre-survey, short survey on basic values, Federal Budget 101, and the Options Workbook. Participants watch the web-streamed Philadelphia event, including various notables speaking about the deficit problem, and also The Federal Budget 101 video giving the AmericaSpeaks narrative about the “fiscal crisis.” (continued)

Next, we received the problem orientation web-streamed to us from the national meeting, including a number of speeches about how exciting and important it all was, from notables representing AmericaSpeaks, The Peter G. Peterson Foundation, the MacArthur Foundation, and one from Alice Rivlin, who has been pushing fiscal responsibility since her days as the first Director of CBO back in the '70s, and who is now on the President's “Catfood” Commission. Alice is one of the best at summarizing the argument for the deficit crisis in just a few words, and she did it again here.

The Federal Budget 101 video was also web-streamed to the group. The video was a revised and slicker version of the video I analyzed here and here. But, the argument presented in it was no different. It's main function was to socialize people into a particular narrative regarding the debts, deficits, debt-to-GDP ratios, and their connection to fiscal responsibility and sustainability. Its purpose was to orient participants to the idea that budget cuts and tax increases would be necessary to avoid fiscal disaster in the long-term and that the participants could really do their bit to help the US avoid it by giving their opinions about the cuts to be made and the taxes to be raised in the process of restoring fiscal responsibility, once the economic recovery was achieved and the recession was behind us.

The participants were given a chance to discuss the orientation speeches and the video and were urged to use the Federal Budget 101 booklet. Objections were made that ending debt issuance and creating a robust enough recovery were not mentioned in the orientation speeches, except to assert, that this deficit crisis was something the US couldn't grow its way out of through a really robust recovery that the Federal Government might facilitate. I again claimed that $1.4 Trillion in 2025 could be saved simply by changing our policies on debt issuance accompanying deficit spending. There was some uptake about this from others, but again time schedules, and group norms about giving everyone a chance to speak, interfered with the full airing of this and points made by others about the desirability of handling the “crisis” through appropriate progressive taxation and facilitating a robust recovery and full employment. Before long, the facilitators moved the group along to the next step.

This is the right place to make some comments about The Federal Budget 101 booklet handed out at the meeting. First the projections in the booklet are primarily based on CBO projections to 2020 and thereafter on extending spending and revenue growth at the same rate. I've already criticized these projections in some detail here and here. I consider them nonsense and urge you to read these other posts to see why. However, apart from my other criticisms, I think AmericaSpeaks's decision to view the Bush tax cuts of 2001 and 2003 as getting extended is a strange assumption, since the Administration has indicated it's going to let them expire. Insofar as their projections are based on this assumption, their presentation is certainly biased since it projects much greater deficits than will happen if the President has his way.

A fundamental assertion of the booklet is that Government deficits and the national debt can grow “to unprecedented and unsustainable levels in the coming decades . . .” But that assumes it is possible for Government deficits and the national debt to become unsustainable in a nation like the United States that is sovereign in its fiat currency. That assumption is never brought up for discussion in the booklet, and no counter-view to it is considered or evaluated. But there are well-known and respected economists who believe that nations sovereign in their own currency never have any solvency risk, so that their deficits and national debts can never become unsustainable. The failure to even consider this alternative view, which implies that there is no deficit crisis at all, is a clear bias in the decision process used by AmericaSpeaks. People attending the meetings should have been informed of this alternative, and had the opportunity to consider it, since it calls into question the legitimacy of what they were being asked to do in the meeting. Failure to give them that opportunity clearly manipulated their involvement and participation in the deficit reduction exercises.

The booklet also states the view that growth in the national debt, if not controlled, risks that one day ”lenders” (the bond market) will be unwilling to lend US Dollars to the United States, or failing that would require higher interest rates from the Government. But this view assumes that Government spending must be “financed” or “funded” and that if not funded by tax revenues can only be funded by borrowing. Again, there's an alternative view; and it is that Government spending in nations sovereign in their own currency isn't “financed” or “funded” by either tax revenues or by borrowing, and that the US and other nations spend independently of taxing and borrowing, and that when spending they simultaneously create financial assets in the non-Government sector, I.e. new money, in the form of non-Government savings, most of which goes to the private sector. In fact, from this point of view, the national debt is just the accumulated savings in the private sector created by Government spending since the inception of the Republic.

It's a further implication of this view that the Government's current use of debt instruments, and also its net interest costs on the national debt are unnecessary expenditures, hangovers from the days of the gold standard, which continue to exist today because they are a convenience for wealthy investors. The Government could, if it wishes, just stop issuing debt after it spends. As current debt instruments are paid off, net interest costs will decline, until they reach near zero, and the bond markets, of course, will have no say at all in this process and no ability to raise interest rates as this process goes on.

If AmericaSpeaks is really unbiased, then why didn't it include this alternative view in its deliberations? It both suggests that there's no solvency or sustainability problem and also that there's no interest problem since interest costs will be going down to near zero very soon. In 2025, for example, this view suggests that interest costs will be at least $1.4 Trillion less that projected using the extended CBO baseline.

The booklet next assumes that the national debt is the sum of deficits and surpluses since the founding of the country. This equates debts and total deficits, and conflates Government spending with Government debt issuance. They're not the same, so total deficits may not equal total debts. If the Government stops issuing debt, but keeps on deficit spending, total debts and total deficits will vary greatly. Again, neglecting to inform participants of this possibility biased the decision process since participants were led to accept the AmericaSpeaks view that spending must be accompanied by debt, which, of course, probably led them to suggest cuts in Government spending, they otherwise would have not have suggested.

The AmericaSpeaks also incorporated highly implausible projections about the likely deficits, debts, and debt-to-GDP ratios we will see in 2025, 2040, and 2050. I make the case here, that projections even a few years out can't be trusted. The idea that projections from 15 – 35 years are anything but fantasy is proof of bias since it represents a choice to tell people a fairy tale, you know very well will never come true. And since, AmericaSpeaks is telling people only one fairy tale, the one among a very large number that will scare the pants off them, it's hard to contend that there's objectivity and unbiasedness here, rather than an agenda to scare people and get them to help you in fingering cuts to be made in the Federal Budget.

Another highly visible bias in the booklet is the constant emphasis on the desirability of balancing the budget, if possible, and achieving surpluses. However, in the absence of inflation, surpluses are bad, not good, for the American Economy. They are not something we ought to aspire to, since the historical record shows that they always precede serious recessions or even depressions. So here is another case where a bias is introduced into the decision process. By not considering the view that surpluses may be bad for the economy, and educating the participants about this view, and by also constantly driving home the message that surpluses are good and deficits, while they may be necessary during recessions, are somehow negative and less than moral, AmericaSpeaks introduced still more bias into the decision processes in the Town Meetings and Community Conversations. I dare say the ratings made by people in the various meetings would have been very different, if they had been informed about the historical correlation between surpluses and recessions or depressions.

Next, the booklet presents rising health care costs as due to the aging of the American population, with the implication being that we ought to control these costs by cutting Medicare and Medicaid. But, what about other factors in rising health care costs over time? How much are rising costs due to bad health insurance company and provider behavior? We know that both insurance costs and provider costs are far lower in other wealthy nations than they are in the United States, so why doesn't AmericaSpeaks discuss these factors and their role in rising costs? Is it because they're trying to suggest solutions that ask working Americans to sacrifice, but not insurance companies or providers?

AmericaSpeaks tells us that the corporate bailouts were one-time events and will have no impact on future deficits. But clearly this view neglects the political effects of the bailouts. The bailouts have created a moral hazard and an expectation that the Government will bail out companies that are “too big to fail.” Will the Government bail out businesses, both financial and non-financial in the future? If so, it will be due to a cumulative political effect of the bailouts that AmericaSpeaks would not consider in its discussions.

The booklet says that not even a return to the growth pattern of the 1990s will eliminate the deficit. But first, that assumes that the growth pattern of the 1990s was very strong, and also second, that our goal should be to eliminate the deficit. It also assumes, third, that a return to growth would be the only factor in ending the problem. Well, going back to the first point, I'm here to tell you that even though many of us fondly remember the '90s and the '80s as periods of strong growth, and even though they compare well with the very tepid decade just ending, they do not compare well with the growth in the American economy during the 40s, 50s, and 60s, of the 20th century, when we worried a lot less about inflation and a lot more about full employment than we do now. Of course, we also had a Government that was much more activist in its approach to the economy for many of those years. In any event, the possibility of a return to growth patterns of earlier decades is not raised in the booklet or ensuing discussions as a way of reducing deficits. Is that because AmericaSpeaks is biased against the possibility that restoring very active Government intervention in the economy could raise growth rates enough to eliminate the perceived deficit problem?

And second, as I've already said, why do they assume that we have to eliminate the deficit at all? If surpluses cause recessions, we would not want to do this, raising the possibility that a return to even Clinton era growth patterns might produce a great result for us.

But third, even if AmericaSpeaks were right about the inability of a return to growth reducing deficits to a level that would be less alarming, what if growth of that kind were combined with a policy of not issuing debt? Then for example, having no interest costs in 2025 would bring down Federal expenses to roughly $5.8 Trillion, leaving $1 Trillion or so in deficits, an amount which would easily be made up in increased tax revenues resulting from a Clinton era growth pattern. So again, why didn't AmericaSpeaks consider possibilities like this and introduce them into the discussion? The answer is that they were not trying to foster a decision process based on consideration of a number of alternative perspectives of what the future will bring us. Instead they were just trying to get people to respond to, and to function within, the AmericaSpeaks vision of the future, a vision which is biased toward eliciting deficit hawk reactions from participants in the process.

Well, that's enough of this analysis of the Federal Budget 101 booklet. I think that people exposed to this booklet were presented with a marketing piece, whose purpose was to "sell" the ideas that there is a deficit crisis that puts this country and its decision makers into a fiscal box, and that the only way out of this box is to make long-term plans to cut Federal expenditures. It made no attempt to present alternative views outside of this frame. So, in short, it was a systematically biased presentation creating a fairy tale about a non-existent problem. I think that's all for now. In my next post, on the event, I hope to wind up this account of the steps in the AmericaSpeaks decision processes and their biases.

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

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taxpayer's picture
Submitted by taxpayer on

Thanks for these comments on the Budget 101 booklet, which I only skimmed because I have run into this stuff before. I assume you'll be commenting subsequently on the Options booklet. Thanks also for pointing out that the government could issue greenbacks, as Lincoln did, to provide currency and meet its expenses without debt. I want to supplement that by pointing out that taxes need not burden economic activity, if they are imposed on economic rent rather than labor and capital goods.

I attended one of the "mainline" meetings with several hundred people at Chicago's Navy Pier. During the early part of the meeting, the volume (both loudness and quantity) or verbiage broadcast from Philadelphia was such that the dozen of us around one table had little opportunity to converse. Later, after the Philadelphia crew READ TO US ALOUD the entire Options booklet, we actually had a chance to talk about some of the issues. We had quite a range of opinions, but there wasn't time to engage in constructive interchange of ideas. It was encouraging that several of us had quickly figured out that our choices were being deliberately circumscribed and there was no way we could come up with a fiscal program that really represented how we wanted to deal with the problems. But we voted on the different options (possibly misunderstanding exactly how we were supposed to proceed) and came up with a set that, sort of by accident, met the objective of, I think $1.2 trillion in cuts.

We were a relatively diverse group, in a standard demographic sense, including several young people (not just younger than me, but two or three that appeared to be under 30); employed, unemployed, student, and an escaped accountant; black and nonblack (none in our little group appeared Hispanic); female and nonfemale.

I met my objectives of seeing how the process was conducted (pretty much as I expected), and meeting a few people who are seriously concerned about fiscal matters. I don't know what the objectives of the MacArthur Foundation and other backers of this project are; perhaps they just want to generate some indication of support for some sort of resolution of the fiscal issues which will not excessively disrupt their interests. This event could not have been cheap to put on. It was held in a high-end convention facility, there must have been thirty paid staff, lunch was provided, even pretty good coffee.

I blogged a bit more about this here.

Submitted by lambert on

Isn't it always?

And I always used to think well of the MacArthur Foundation -- the genius grants, and all. Oh well.

* * *

I can't believe that the Philly crew actually read the booklet out loud. That's ... a little crass.

letsgetitdone's picture
Submitted by letsgetitdone on

when I get to it. Our group voted to split into two. About 4 of the 20+ people attending chose to watch the national webstream on the options sitting at their own table, the rest of us consciously decided to gather around another table and work through the exercises on our own, and discussed things later.

letsgetitdone's picture
Submitted by letsgetitdone on

Thanks for your take, taxpayer. It sounds like the Chicago meeting was like ours in that the pre-planned program was so intrusive that it prevented results from emerging from the bottom up in your meeting, just as it did in ours. It was as I say procrustean democracy, or perhaps "guided democracy" or "managed democracy," but it was not authentic democracy.