Framing Deficit Debates

Posted on by xiphoidmaneuver and tagged , , , , . Bookmark the permalink.

The United States is in debt and running a deficit. Two parties frame the situation differently to define their solutions as correct and hide their subjectivity.

Democrats frame a deficit problem as “Spending more than we take in” – or if in a particularly taxing mood “Taking in less than we spend.” The logical solution is to raise taxes, cut spending, or do both. When the problem is severe and everything is on the table you do both.

Republicans frame a deficit problem as “We have a spending problem, not a revenue problem.” Increasing revenue then isn’t a bad solution we should avoid – its not a solution in the first place.

Either frame can be defended readily, depending on what you consider to be problematic. How about this then: US Rep Jan Schakowsky (D-Ill) is introducing a bill , which would have the government hire many people as teachers, construction workers, police, etc.

Let’s hear a reaction from Illinois Republican Party Chairman Pat Brady: “It also makes me think she does not know about basic economics. Government does not create jobs. This is just one of her many redistribution schemes. It didn’t work when they spent $862 billion on the stimulus. It is amazing to me with what everything that has occurred in the past year, she would come out with something like this. It makes no sense on a variety of different levels.”

Brady has introduced two frames I want to note.

1) “They” spent $862 billion: The stimulus added $862 billion to the deficit, but much of that figure comes from tax cuts a.k.a. revenue decreases. If cutting taxes is a form of spending then does ending a tax break constitute cutting spending?

2) “Government does not create jobs”: Brady is responding to a bill that proposes the government pays people money in exchange for work. You know, hire them. Brady opposes this with the supporting point that “government does not create jobs”. I interpret this literally as a simple falsehood. If anyone finds this frame appealing, please explain why this frame appeals to you and how you interpret it.

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21 Responses to Framing Deficit Debates

  1. Pastabagel says:

    The manipulation of language is the thing that makes me crazy about politics. Cutting spending often means cutting the growth of spending, so it grows less. Arguments against raising taxes always fail to point out that the tax system is progressive, so any increase in taxes is on the portion of income above that threshold (E.g. 40% tax rate on $1,000,000 does not mean someone making a million dollars pays $400,000 in taxes, it means they only pay 40% on the amount they make in excess of $1 million.)

    And I suspect that politicians of all stripes rely on this word play to disguise that they themselves don’t understand the underlying mathematical truths. They don’t read the bills themselves, they have staffers brief them on it. It’s all very sloppy, non-rigorous, and unanalytical, and in my opinion it is why the situation is as bad and confused as it is now.

    • V.V. says:

      If anyone finds this frame appealing, please explain why this frame appeals to you and how you interpret it.

      Ms Brady got her memes confused. Yes, government obviously can create jobs, but she might have been more true to her school if she’d said government cannot create prosperity. It can create conditions favorable to economic growth, and it can kill prosperity, but it really can’t create it, especially by putting people on the federal payroll. Here’s why:

      The federal government currently borrows 40¢ of every dollar it spends. The forty cents is borrowed for a period of years at interest. If the 40¢ isn’t paid off by the time the bonds
      come due, more bonds are issued, etc, etc.

      So 40% of the new job is is put on the national Visa card. By the time the 40¢ is paid off, it costs more than 40¢. On a ten year bond, a lot more. Interest expense doesn’t stimulate economies, it tends instead to shelter the income of rich people and countries.

      The 1.8 multiplier effect may be true or wizardry, depending on whom you believe. But if it were literally true, why not give jobs to everyone who wants one and watch the effect multiply? Because borrowing 40% of what you spend doesn’t wash in the arithmetic.

      The private sector can create prosperity through individual incentive. That’s how the Chinese
      miracle of the last 20 years has gained traction.

      I am in total agreement with PBagel about slippery language. It amounts to subterfuge. Politicians who do that are not to be trusted. That wipes most of them out.

  2. max says:

    2) “Government does not create jobs”

    I think it’s impossible to say, actually. A conservative would argue that taxes reduce profits that businesses would otherwise use to hire workers, and borrowing just pulls jobs from the future by causing increased taxes down the road. The counter arguments all center around what kind of jobs are created, and whether there’s some kind of multiplier effect (better roads = lower transportation costs, better education = better paying jobs = more taxes). All of these things are true to some extent, and follow on effects make outcomes even harder to understand.

    • CubaLibre says:

      The problem is the way it’s stated as an axiom. “Government does not create jobs.” Well, before there were 5 police officers. Now there are 7. Government hired 2 more police officers. 2 more police officer jobs were created. Right?

      Okay, well, maybe not, if you look behind the way the government obtained the money to pay the 2 new officers (taxes) and what the effect of that taxation has on private sector jobs creation down the road (the taxation created 2 jobs but prevented what otherwise would have been the creation of 3 later).

      This may or may not be true in any particular case, but Brady has never gone through this line of thinking. Or, at least, if he has, he doesn’t let us know in any of his public statements. Instead they take the form, “government spending is bad. Creating jobs is good. Therefore when the government spends to create jobs, no jobs are actually being created.” The thinking literally stops there, with that blatant contradiction. The major premise overwhelms the minor. It is an essentially faith-based position. That our entire political discourse, from both sides, consists almost entirely of such statements is exactly why politics is such an intractable mudpit and our economy is in the shitter.

      • max says:

        It is an essentially faith-based position.

        You could say the same thing about macroeconomics! :) It’s tough to make predictions, especially about the future.

  3. Joe says:

    1) “They” spent $862 billion: The stimulus added $862 billion to the deficit, but much of that figure comes from tax cuts a.k.a. revenue decreases. If cutting taxes is a form of spending then does ending a tax break constitute cutting spending?

    Most of those “tax cuts” were in the form of refundable income tax credits, which are a form of spending. The government takes the same amount of money in as it did before, and then pays some other amount of money to people who qualify for the credit. The kind of tax cuts that the GOP tends to favor (including the “Bush Tax Cuts”) usually are in the form of lowering rates, where the government takes a smaller amount of money than it did before.

    In other words, the phrase “tax cuts” is something that can be framed as either spending or not spending. So the answer is “sometimes.”

  4. Dan Dravot says:

    Yes, government can trivially hire people, but what most of us think we need more of is jobs in the private sector, where the person doing the job creates more wealth than he consumes. Very few government jobs do that, if any.

    Let’s not throw out the baby with the bathwater: Some government jobs are indispensible in fostering or enabling the creation of wealth elsewhere. We’d all hate to live without cops and firemen, for example. Road and bridge construction may be corrupt and wasteful, but the utility of public roads is so great that most of us figure it’s a net gain (not counting Boston). If people could get along OK without government, you’d think somebody somewhere would’ve actually done it. Nobody has.

    But the action is at the margins (tattoo that on the inside of your eyelids). Think of it this way: Your first beer adds value to your life. Your second beer adds value, too. Somewhere between Beer #2 and Beer #30, you start vomiting. The value added by each additional beer is not a constant.

    Likewise, the cops you actually need to keep the peace are indispensible. They add a whole lot of value. But after law and order is adequately established, each additional cop adds much less value. Likewise, you could tear up a good road and replace it with an identical one, but that adds no value at all. The same goes for everything else government does: More than enough is a waste. But how much is “enough”, without a market to decide? It’s easy to tell which roads need repaving, but how many cops is enough? Well, if the only reason anybody can think of to add more cops is to give people something to do, you don’t need more cops. Most of the USA isn’t exactly Somalia.

    We’re spending something like 40% of GDP on government. That’s probably more than enough. That’s something like two out of every five employable Americans standing around barking arbitrary and contradictory orders at the other three. Worse, they’re mostly unionized and unfireable. The excess ones will be a net drain on society for the rest of their lives. Even Keynes didn’t think you should live beyond your means after the emergency passes.

    So: Brady’s using the word “jobs” as a casual shorthand for “real jobs in the private sector which result in a net increase in wealth”. He thinks government can’t force a net increase in the jobs we actually need to create[1]. It’s trivially obvious that government can hire more people to stand around doing nothing, but it’s also trivially obvious (to him) that doing so is, at best, a temporary amelioration of the real problem, which is that the productive economy is in a bad slump. He thinks that solving the real problem is essential.

    But he’s not communicating at all effectively to people who don’t already see it his way, and you’re right to call him out on that.

    [1] Government can subsidize businesses run by politically favored billionaires, of course. Where would we be without Jeff Immelt and Warren Buffet? But the thinking here goes that subsidies are expensive; they destroy jobs elsewhere, in order to create jobs which the market values less than the ones you just wrecked. Look at the “green jobs” debacle in Spain, for a real life example, or the “jobs created or saved” debacle in the US. This view may be wrong, but it can be supported by numerous clear examples from real life, and Keynes can’t. But in any case, you weren’t suggesting subsidies to the private sector; you were suggesting direct hires by government.

    • mwigdahl says:

      Well put. I’m always amazed that the “getting good value” part of spending money always seems to escape politicians when they spin up a good Keynesian stimulus frenzy. The canonical (and possibly canardical) example is paying people to dig holes and then fill them up again. At that point you may as well just hand the money out on street corners; it’s nothing but welfare.

    • xiphoidmaneuver says:

      Very well explained. Thank you.

    • CubaLibre says:

      This is a nice little analysis. But:

      Do you really think Brady is using “jobs” as a casual shorthand for any considered piece of economic policy? Or is he actually using it as a codeword, a Conservative Bat-Signal that aligns him with an emotional team (“government spending is bad! the founders wouldn’t like it!”) as opposed to a considered policy position?

    • durand says:

      You say: “The same goes for everything else government does: More than enough is a waste.”

      My question: a waste of what, exactly?

  5. TheCoconutChef says:

    I think his whole vocabulary, as expressed earlier by Pastabagel, is a sort of marketing distortion. Wether or not Brady knows this might be the greater concern here.

    But what politican arguably distorted from is the idea that capital always seeks the best return and that, by doing so, private economic entitites are the one best positioned to create real economic growth. If a government entities actually has to take the money from someone in order to put it elsewhere, what it’s actually doing is preventing capital from being put by private individual in the place in which it would create the most wealth. If what the government was doing was actually profitable, why were they not private investor in this particular field? If there’s a profit to be made, somebody will step up. If there isn’t, the money either won’t show up or the people investing will go bankrupt.

    So it’s an argument about incentive structure and how the private interests of people actually drive sustainable economic development.

    Now, this is all fine and well but I’m sure that at some point a marketing firm realized that people understood the concept of economic growth better through the formula “growth = employment” and so “government spending does not respond to the incentive structure of economic viability which is one of the biggest driver in the increase of the common wealth” became “government doesn’t create jobs”.

    Because fuck it man somebody needs to be elected.

  6. Cambyses says:

    Well said.

    1) The economic: I agree with your take on market economics. Capital does seem to like return… only I worry that this thesis has broken down over “private economic entity.” During the 1970’s we (yeah, I share some responsibility in this debacle) learned via mergers and acquisistions that financial firms can turn a profit on a deal regardless of whether or not that deal (the merged company) actually works out or not (merged company succeeds or meteors). I guess my large question is that, due to deregulation business insulated iteself against failure (golden parachutes in place of Shylock coming for your pound of flesh), and in the process, did we subvert the notion of incentive to such an extent that classical economic principles are not longer meaningful on the top levels of the economy? I mean, like the Shakespeare play, we always resented the dark side of incentive, maligned it and sought to escape it… but maybe this fear was essential in keeping our firms running and keeping our system viable. It seems like, here at the end of history, both capitalism and communism unlearned the lessons of incentive to their mutual peril.

    2) The political: “We have a spending problem” is code for “cut social programs.” I think Halliburton, McDonald-Douglas, Raytheon and so forth would be suprised to learn that gov’t does not create jobs. There’s a hidden ethical agenda here that it’s crazy to spend money on chemotherapy and pacemakers but it’s necessary to spend money on cruise-missiles and Humvees. Look at mortality statistics from the 50’s and 60’s, stroke was at the top. Anticoagulation and rate-control have increased longevity and improved quality of life. We stop paying for these things and we have legions of post-stroke disabled baby-boomers who will require long-term care, develop pressure-ulcers, secondary infections, delirium… Call this “entitlement” if you will, but while it’s extremely unlikely that a terrorist will kill you, it’s a pretty good bet that heart-attacks and cancer will. The term “entitlement” disguises this choice to the reader, and to the writer disguises the internal conflict about choosing Halliburton or “national security” over old people. “Entitlement” seems like it can be punished out of people, confronted and that it can be emotionally satisfying to deprive lazy citizens of it. The whole issue is being managed by keeping it out of consciousness and disguising the issue, probably both publicly and personally. In a sense, destroying the health-care system will be the worse decision we never made.

  7. geerussell says:

    Context is everything.

    If the government spends to hire people when the economy is already employing them at full capacity then it’s bad. It’s bad because the government competition is bidding up the cost of resources already being used productively by the private sector. In this context it’s inflationary and a drag on growth.

    If the government spends to hire people when the economy is tanking, then it’s good. It’s good because unemployment is cement shoes on an economy trying to tread water. Government job creation in this context is a flotation device to keep the economy from drowning until it sorts out what’s ailing it. Because those resources were otherwise idle, this spending isn’t competing with the private sector and isn’t inflationary.

    Like any other powerful prescription, government spending can help or hurt and requires a proper diagnosis before being used.

  8. Fifi says:

    The old saying, “politics is show business for ugly people” is pretty relevant and even more true now that, well, it’s so much more like show business that not only is there a lot of crossover and they’ve started using real actors (or, in some cases, people who are akin to reality show contestants…they can’t even distinguish between reality and theatre). So, now it’s just show business with not much room for ugly people. Why? Because they’re not even pretending it’s anything more than show business and theatre and politicians are just spokesmen/puppets. So, you have puppet politicians whose masters are people like the Koch Brothers and other heads of corporations (and this is true of both parties in the US). None of the real politics are actually going on in public, everything you see on the news is theatre at this point. Of course, part of the act is pretending that the theatrics are democracy in action. So, there’s much ranting about patriotism (even though the puppetmasters’ concerns are actually international and not national) because that’s a wonderful trigger, which if deployed properly hooks into individual narcissism and identity as a means of emotional manipulation, sometimes you get some real conflict when the puppetmasters disagree (in reality,
    American politics seems more about Gates/Warren vs the Koch Brothers than Democrats vs Republicans). Of course, the people most attracted to acting in this kind of theatre tend to be narcissists (and we all know how much they really care about you and me, even if they can pull off a decent performance of being a caring or empathetic person). So, it’s not really surprising that a great many politicians don’t understand what they’re talking about when it comes to economics – after all, they aren’t really interested in politics, society or economics per se, many are quite wealthy to begin with (so have never actually had to balance a budget or be frugal), and essentially they’re interested in what they can get in terms of ego/propping up false narcissistic identity, pleasing their puppetmasters, etc.

    Really, if you want to know what’s going on in politics (both at home and abroad, national politics is really just a subset of international politics in today’s world) it’s about watching what the billionaires do and they’re certainly splitting into the Randian capitalists (like the Koch Brothers and Murdoch, many of whom seem to be industrials clinging to industrial dreams) and the philanthropic capitalists (Gates, Soros, Warren, who have made their money through innovation or investment and knowing the economic system well). For my money, little as it is, I’d go with the people who understand the post-industrial age we live in, not the one’s reacting against it. All are capitalists, some just aren’t total narcissists (or at least, if they are narcissists, their false self image includes being a decent human being and not just a ruthless businessman).

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