Cross-posted from mediadeconstruction.com
In the current climate of austerity, recession, and anxiety about perceived national decline, we, as a nation, face numerous large, complex, multivariate problems. An intricate mix of history, policy, political structure, and economic structure drive our problems in ways that cannot be easily understood or communicated, much less resolved. Unfortunately, the more cynical among the political punditry and politicians of a certain stripe have been sewing a simple, easy to understand policy prescription for every public problem: “We can’t afford that anymore.” No other narrative framework for discussing important policy more expertly serves the conservative agenda than this frame. While Republicans have been shoehorning this phrase into stump speeches on nearly every issue for the past few years, a recent example of this came from Governor Bob McDonnell (R-VA) while providing an interview on CNN as a Romney surrogate. Governor McDonnell said,
Because the biggest problems facing the country have to do with a $16 trillion national debt and a crushing unemployment rate that's affecting the middle class. And so, Paul Ryan is the guy that understands the federal budget, perhaps better than anybody and along with Mitt Romney I think has got the right ideas and, Soledad, to say, listen, we can't afford this anymore. We've got to make tough choices. We've got to reform Medicaid and Medicare if we're going to get the country back on track.
Notice the pairing of “we can’t afford this anymore” and the need to “reform Medicaid and Medicare.” As I will get to later, and will address throughout this entry, conservative politicians repeat this phrase whenever discussing popular social programs. The tactical framing of the debate in these terms allows conservative operatives to, on the one hand, acknowledge the legitimacy of using public expenditures towards the goal of the social program in question (in the case of Medicare, guaranteed health care services for the elderly) and, on the other hand, using an arbitrary and short-term public finance circumstance to justify reductions to said social program, shield operatives from public outcry at the threat of losing a popular service. Embedded in this tactic is a set of economic and political arguments that reveal a great deal about the conservative worldview, and I will explore each in turn. Follow me below the fold.
“We Can’t Afford {Social Programs} Anymore”
The phrase itself, particularly when applied to public policy issues and government finance, implies a zero-sum economic structure and a concrete cap on public resources that, as it happens, exists at a level just below our current resources. It simultaneously taps into the average person’s everyday interaction with the economy, working from a limited budget on a short time horizon, and current anxieties driven by high levels of private debt, stagnating and declining wages, and employment scarcity and insecurity. The average person cannot afford things they once could, ergo society cannot afford services it once could.
Political pundits and commentators, political operatives, and some think tanks around the beltway trot this frame out constantly when discussing almost any area of current policy issues, social problems, or government finance issues. The “beltway bleaters” (as I will collectively refer to this collection of narrative drivers from now on) embracing the Bowles-Simpson Commission deficit reduction plan as the only sensible solution to our nation’s problems embodies the internalization of this framework. The “beltway bleaters” treat the “balanced approach” of this commission’s as a legitimately centrist resolution to our problems, held back only by extremism on both sides. Underlying the idea that our dual, but related, problems of a fiscal deficit and the ongoing deterioration of our schools, century old infrastructure, social safety net programs, and public research and development funding should legitimately be resolved by further reducing expenditures in public goods and raising a relatively small amount of public revenues lies an assumption that a concrete point of appropriate public services exists and we are beyond that point. In other words, all of the things that have built a strong, stable economy over the last three-quarters of a century…we can’t afford those anymore.
Is that true? The claim that we as a nation can’t afford certain government expenditures towards public initiatives in a variety of issue areas contains embedded assertions about the economy, the size of the government in the economy, revenue streams for government initiatives, and resource allocation decisions. Of course, the “anymore” in this ubiquitous excuse for cowardice in the face of social problems implies that at some point in the past America could afford initiatives aimed at resolving social and economic problems. In order to analyze the veracity of each of the embedded assumptions of the phrase, I need a point of comparison. Fortunately, Governor McDonnell provided the perfect example of a social program, Medicare, that we as a society supposedly cannot afford anymore. Consequently, a good point of comparison would be to look back on the years shortly following the passage of social programs such as Medicare. The years 1970-1980 serve as a strong point of comparison for two reasons. First, about five years had passed since the Great Society policy regime (which included Medicare and Medicaid) and its corollary War on Poverty programs were passed and implemented, allowing enough time for the programs to make an impact on our society and economy. Second, an economic slowdown and long period of recession was taking hold, creating similar economic and fiscal conditions to those faced today.
The Economy
The first thing to unpack in the argument that we can no longer afford social programs is the argument being made about the economy. Returning to the fundamentals about public finance, as taxation of economic activity serves as a revenue source for the provision of public services, a given society’s ability to fund public services is a function of said society’s economic output. A society with a large number of economic transactions from which to draw revenue can support a wide array of public services. Consequently, to argue that we, as a society, can no longer afford to fund various public services that we have, heretofore, funded, is to argue that our national output, the sum total of economic transactions in our national economy, has declined dramatically since the time of adopting the social programs in question. Is this true? Has there been a significant decline in GDP since the adoption of Medicare and Medicaid? In order to examine the change in the economic output of the U.S. economy between the decade following the implementation of the Great Society social programs (1970-1980) and the most recent decade (2000-2010), I used annual GDP data gathered from the Bureau of Economic Analysis’ historical database. Of course, a raw comparison cannot be done, as inflation adjustments would need to be taken into account. Fortunately, Census provides GDP in 2005 chained dollars that allow for a direct comparison of economic output from two different time periods.
As the table above indicates, controlling for changes in the value of the dollar, the output of today’s economy, even amidst a deep recession and continuing high-levels of unemployment, far outpaces the outpace the U.S. economic output throughout the 1970’s, when the social programs enacted under the Great Society were in full swing. For each year, the economic output throughout the 2000’s has been greater than double compared with GDP in the time period 30 years prior. In fact, comparing the GDP of 2010 with the GDP of 1970 reveals that economic output only one year after the beginning of the Great Recession was 206% higher in 2010 than in 1970. Of course, the more sophisticated observer may suggest that the growth could be attributable to growth of government expenditures in the economy, since GDP includes government expenditures.
The Size of Government in the Economy
Using data from the Census bureau’s historical database, I again used 2005 chained dollars to examine total government activity as a percent of GDP from 1970-1980 and from 2000-2010.
As the table above shows, government expenditures since 2000 represent a much smaller portion of total economic output than they did at the height of the Great Society policy regime. Many conservatives argue that economic growth requires less government spending as a share of GDP, and they disproportionately target social programs as the necessary recipients of such trimming. Of course, this has been the ideological mantra of conservatives for several decades, but here’s a handful of recent quotes from conservative leaders that captures the subtle spreading of these sentiments.
John Boehner (R-OH) said in December of 2010,
We need to cut spending. That's what the American people want. That's what the economy needs.
Rob Portman (R-OH), noted boring, white male that made Mitt Romney’s shortlist for potential VP pic, says on his congressional
site,
Washington has turned to more government spending, higher taxes, while pushing for overly burdensome regulations on job creators and manufacturers – slowing our economic recovery. We’ve already learned from experience that we can’t spend our way to prosperity.
Of course, I could continue, but there’s no need. As my second table indicates, the claim that the an increase in the proportion of GDP made up by government expenditures (e.g. the size of government) creates a drag on the national economy is demonstrably false. As the table indicates, economic growth throughout the 1970’s dramatically outpaced growth in the 2000’s. Although the 70’s contained three years of negative growth to the 2000’s two years of negative growth, the annual growth rate in the 1970’s exceeded 5% four times while the 2000’s exceeded 4% only once, in the first year of the decade.
Taking the two points together, the emptiness of the assertion that we can no longer afford to publicly fund policy initiatives aimed at mitigating social problems becomes clear. While our economic capacity has grown exponentially since the height of the Great Society initiatives, our expenditures on public initiatives has declined considerably. We, as a society, have funded more with less in the past. So why do conservatives claim we can no longer afford to fund social programs?
Revenue Streams for Government Initiatives
Obviously, the public deficit is the reason that conservatives repeat this claim over and over in as many public forums as possible. Of course, the deficit, at it’s most fundamental level, reflects expenditures on public initiatives, economic output, and the revenues from the taxation of economic transactions. Although the federal government is funding far fewer initiatives today than it was in the 1970’s (and, with the exception of mandatory programs, those that are funded receive less money), and despite the massive increase in economic output, the public balance sheets remain negative. The only remaining component, of course, is taxation.
In 1970, the highest marginal tax bracket on personal income was 71.75% of income above $200,000. In 2010, the highest marginal tax bracket on personal income was 35% of income above $373,650. Not only is the marginal tax rate less than half of what it was in the 1970’s, the income taxed at the highest rate was much higher, thereby reducing the number of people paying the highest rate. In addition, as the tables in the two links indicate, 1970 contained far more brackets of income being taxed, leading to a much higher effective rate on high income earners.
The Point
The point of all this is that we, as a society, generate enough economic output and resources to fund not only our current social programs, but a host of additional public initiatives to meet the dire needs of our modern (and struggling) economy. The public’s financial problems are not do to a lack of resources available for popular public initiatives or public solutions to our contemporary problems. The public’s financial problems stem from conservatives exploiting our institutional procedures to prevent the collection of public resources to use for social initiatives. To say “we can’t afford that anymore” implies that the “we” of public finances is both concrete in it’s current structure and separate from the “we” as a national economy. The statement distracts away from an important, mature discussion of the severe problems we face as a nation, their sources, and the broad range of policy solutions available to resolve them, and redirects to a discussion of public finance.
In a single phrase, conservatives hide their desire to cut popular programs behind the current state of public finance, and imply that revenue measures to shore up public finances are not available. Using such a misdirection when discussing solutions for real national problems displays both cowardice and cynical disbelief in democratic governance. If conservatives do no believe the government should finance social programs such as Social Security, Medicare, and Medicaid (which many do not in private, and some, in particularly safe seats, do publicly say so), we should debate the merit of these programs honestly, on the merits of the programs themselves. If the public supports these social programs on their merits, then we move toward raising the necessary public funds for these social programs. The bottom line: if public finance excuses are all conservatives can offer the American public for resolving important national problems, why should we allow them to serve as national leaders?