patoadam

Here are my thoughts on the debt ceiling negotiations. All comments welcome. Feel free to agree or disagree, to say that this post is interesting and insightful, or to complain that it is didactic and boring.

I start from the premise that the government is supposed to save us money by doing things in the public interest that it can do better and cheaper than private enterprise. I bet you agree that it doesn’t always do this. It is possible for the government to waste our money in at least three ways:

• When it does something not in the public interest. I place our military activities in Iraq and Afghanistan in this category. YMMV.

• When it does something that the private sector could do better. I can’t think of a major government program in this category. Your suggestions are welcome.

• When it fails to do something in the public interest and within the limits of its constitutional authority that it could do better and cheaper than the private sector. For example, all the evidence I have seen indicates that government health insurance is less expensive than private health insurance. Since 1969, the real cost of Medicare per beneficiary has risen by a factor of five. This is terrible, but the real cost of private health insurance has risen by a factor of eight. We would save buckets of money if public health insurance were available to everyone.

If I’m right so far, the general principles of what to do about the federal budget are clear. We should eliminate government programs that waste money. We should continue, expand, and create government programs that save us money. We should happily tax ourselves enough to pay for everything, because the government would be saving us money.


In the current debt ceiling negotiations, on the other hand, it seems to me that our elected representatives are doing just about everything wrong.

First, they are worrying about the wrong problem. Our structural budget deficit is a legitimate long-term problem, but not what we should be worrying about right now. If the national debt as a percentage of GDP rises over the long term, it means that future generations will pay a portion of the cost of government benefits we receive, which I consider unfair. But it is a far more serious problem when the government wastes money for any of the three reasons I have listed above. The government can still borrow money at less than 3% interest, so how can the national debt be our most pressing concern?

Second, the rumored budget cuts currently being discussed are cuts to programs that, in my opinion, save us money: programs like Medicare, Medicaid, and Social Security, which are in the public interest and which the government can perform better than the private sector.

Third, the negotiators are not considering tax increases. I wouldn’t increase taxes on the poor or middle class, but I would certainly increase taxes on the wealthy. My reasoning on this issue deserves a separate post.

Finally, I think that Congress has an obligation to increase the debt ceiling with no strings attached. If they don’t authorize the government to pay the debts they have already incurred, I will consider them to be a bunch of deadbeats. One also can argue that the 14th amendment requires Congress to raise the debt ceiling. I am not a lawyer, so I don’t know if this argument is correct. In any case, I don’t think that the obligation to raise the debt ceiling is contingent on anything, so I don’t think that Congress should be negotiating about spending cuts, tax increases, or anything else.


Here is a mystery I don’t understand. I have emphasized that the government can, and often does, save us money. If I am right, why haven’t I heard anybody else saying this? Many voters want lower taxes and less government spending because they believe that the government wastes their money. Why don’t politicians explain to them that the government is at least trying to save them money?