A member of the studio audience has asked my opinion on the matter of shutting down the Federal Government through its inability to pass a budget.
I do not feel qualified to give a final verdict on this issue because of its complexity, but I can comment on some of the principles involved.
First, we are dealing with an issue morally comparable to theft on a massive scale. Our legislators are engaged in a continuing practice of buying votes by taking money from those who have no voice in our elections (thus no voice in who gets to become a Senator or Representative, and completely unrepresented in Congress) and giving that money to those who are eligible to vote.
Specifically, they vote to take money from children and those not yet born and give their future earnings to current voters through a process of deficit spending.
This practice should end.
This is not to say that government debt is never justified.
When the benefits for a project are to be harvested by future generations, then we can give an argument defending the practice of going ahead with the project and sending the future generations the bill. This happens, for example, when we spend money on improvements in infrastructure where the benefits are realized when the project is done - and those who benefit can pay off the loan. Future generations may also benefit from a war fought today that would have left them under the rule of some tyrant.
However, much of our debt is outright theft. Children grow up to discover that they have been robbed of tens of thousands of dollars by past generations who spent that money in themselves before they even have their first job.
So, morally, we need to end this practice. We need to cover our debts and the thefts committed against us from past generations, and make sure that we treat future generations better than past generations treated us.
Second, how should we do this?
The government either has to increase revenue, decrease spending, or both.
The same is true of a family that discovers it has run up $50,000 in credit card debt. To start getting out of debt, it needs to cut spending, increase revenue, or both.
However, telling the current spenders that they cannot have the goodies they have been accustomed to because we are going to end this practice of robbing from future generations is not going to be popular. It is going to make a lot of current voters angry – and a lot of those voters are going to tend to favor those who WILL rob from future (voiceless) generations to please the current voters.
With these two options on the table, we seem to have a situation in which the Democrats are saying, "do both - cut spending and increase revenue (taxes). While the Republicans say "cut spending only".
To be fair, the Republican position is that raising taxes will decrease revenue. Increasing taxes will harm the economy by forcing marginally successful businesses to close and reducing incentives for productive labor that would then be subject to the higher tax. Working to pay taxes just isn’t worth the effort.
To see the truth of this, imagine a situation in which the tax rate is 100 percent. I suggest it would be quite difficult to get somebody to do work when somebody else gets to walk off with everything the worker makes.
Now, imagine a place with a 95 percent tax rate where the tax rate is dropped to 90 percent. This change amounts to doubling the amount that each person gets from a unit of work. If they were used to getting $1 (from every $20 earned), they now have $2. On the other hand, the direct change to revenue for the government will be small. We can well expect that the extra effort people will put in to earning $2 instead of $1 will more than cover the loss in government revenue from $19 to $18 per unit of taxable activity.
On the other hand, if we have a place with a tax rate of 10 percent that drops to 5 percent, we have the opposite effect. People will see their return from productive labor increase from $18 to $19 (out of every $20), but the government’s revenue will be cut in half. It is unlikely that dropping the tax rate from $10 to $5 will double the amount of productive work people are willing to engage in.
So, the question is, where are we between these extremes? Are we at a point where a cut in taxes will increase revenue, or decrease revenue?
I don’t know.
This leads to the third point. Politics needs to be an arena where people with different ideas reach a common conclusion. However, this political process is blocked when arrogant people pretend to be incapable of error and, thus, unwilling to listen to alternatives.
On these matters, I tend to think that the Republicans are more likely right than the Democrats. However, I recognize the possibility of error, and that leads me to be willing to compromise and accept solutions that Democrats will favor.
However, our current species of Republicans tend to be a particularly arrogant group who are so certain of their infallibility that they are unwilling to compromise.
When we note the contempt for evidence and reason that many Republicans tend to show in the fields of biology, chemistry, and physics – the hard sciences - the idea that they are the model of intellectual integrity when it comes to economics is laughable. They have not, in any way, earned the right to be as arrogant and uncompromising as they are showing themselves to be in the current situation.
They particularly have not shown the level of intellectual discipline necessary to cause the harm to others that a government shutdown will cause. They have gotten much of what they wanted. In the current negotiations, it seems that the Republicans have gotten more than the Democrats. Yet, they still refuse to sign the papers that would end the shutdown and prevent the harms that would follow.