Budget Deficit: Crisis or Pretext?

April 10, 2011

Washington is gripped by a budget crisis so severe that lawmakers narrowly avoided a government shutdown.  At least that is the story.  We at the Machiavelli household are skeptical.  It is certainly true that the U.S. has a budget problem, but it is not a crisis.  The crisis talk is simply a pretext for self-serving emergency legislation.

We can gauge the severity of the budget problem by comparing our situation to that of other countries.   If we do that we find that, as a percentage of GDP, the U.S. debt is modest.  According to the CIA Fact Book (2010 numbers) Japan’s debt is 225% of GDP. Mighty Germany’s debt is 79% and the UK’s is at 76%.  The U.S. debt is a modest 59 % of GDP, just one percentage point above the world average. 

If the budget is a problem but not a genuine crisis, what is happening?   In politics, when things do not add up, one must suspect strategic mendacity.  I suspect that what we are seeing is a propaganda ploy that we might call the “artificial emergency”.

My best guess is that the phony budget crisis is analogous to the Reichstag fire in Berlin (27 February 1933).  This is the classic example of taking a simple problem and claiming that it is a crisis and then using the supposed crisis as a pretext for promoting a radical, self-serving response.  In 1933, Hitler claimed that the fire was the first move in a communist plot to take over the country.  He asked for and got a declaration of emergency, after which he made mass arrests of opposition leaders.  The Nazi party gained a clear majority in the Reichstag and then passed the Enabling Act, which allowed Hitler to govern by decree. 

The artificial-emergency ploy did not die with Hitler.  The supposed crisis (over weapons of mass destruction), which the Bush administration used to promote America’s entry into the Iraq war, and which the press bought hook line and sinker, provides a modern example.  

In response to the artificial budget emergency, Paul Ryan (R, Wisconsin) has prepared the Republican budget proposal (the GOP version of the Enabling Act).  His cuts kill healthcare reform, financial reform, and the federal support for home ownership, but propose no cuts in defense spending.  On the other hand, Ryan finds money in his budget to cut the corporate tax, the capital gains tax, and to make the Bush tax cuts permanent.  Ryan’s proposals are revolutionary, not on the level of the Enabling Act, but they are certainly radical and self-serving. 

Ryan’s proposals are also risky for the country, but not for the Republican Party. Reducing federal spending too soon could endanger America’s recovery from the worst recession since the Great Depression. 

However, the Republicans can afford to take that risk.  If big budget cuts kill the recovery, the party benefits because the administration in the White House, typically gets the blame for an economic down turn.  If the economy survives, the Republicans can take credit for saving the economy from Obama’s runaway spending.

In spite of the new blood in congress, this is just politics as usual.  A politician must as, Niccolò tells us, be a fox and know how “to circumvent the intellect of men by craft”.

“But it is necessary to know well how to disguise this characteristic, and to be a great pretender and dissembler; and men are so simple, and so subject to present necessities, that he who seeks to deceive will always find someone who will allow himself to be deceived.”

The Prince , Chapter 28

Nobel laureate economist Paul Krugman compares Ryan’s ideas to unicorn sightings.

However, true to Niccolò’s prediction, most pundits are saying that Ryan is a hero.  For example, Carla Feide of CBSMoneyWatch.com tells us that  Ruan “deserves credit for taking on the big ticket issues… Paul Ryan has grabbed the third rail.”  Whoopee.

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