29 February 2012

The Arithmetic is Easy - the Politics are Hard

Today Fed Chairman Ben Bernanke spoke before the House. Essentially, they were upset with him less for anything he was doing with monetary policy than the fact that he wouldn't force them (yep - them as in Congress) to do a better job with fiscal policy.

"Don't you think that we should lower deficits," they asked him.


"Well, why don't you make us?"

"I do monetary policy. You do fiscal policy. This is something you'll have to do yourself."

"But ..."

And so it went.

The math is easy for a (roughly) balanced budget: you either cut spending, raise taxes or do some combination of the two. In Ezra Klein's words, we spend most of our money on old people, poor people, and defense. If you don't raise taxes (or only raise them a small amount), you have to cut spending on one of these three. The math is easy. It's no so easy to tell retired people that they'll have to give up their retirement or to tell the homeless that they'll have to give up their homes or to tell the military that they'll have to give up their guns. The American people pretty much insist that you lie to them before they will elect you: the only safe answer is, of course, to promise to make government more efficient.

The math of balanced budget is easy; it's the politics that are hard.

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