Matt Yglesias’s Provocative Take on the Trouble with Grand Bargainism

by Reihan Salam

Matt Yglesias makes the case against fixating on America’s long-term fiscal trajectory:

The way CBO scoring is supposed to be useful is that a member of Congress might have an idea he’s genuinely enthusiastic about and want a credible analysis of what that proposal would cost. He might then also want credible analysis of which tax measures would or wouldn’t raise an appropriate amount of revenue. But the CBO doesn’t employ fortune tellers who can assess conjectures about the future application of information technology to health care, about the military situation in the Pacific Rim, or about the political economy of tweaks in program design. So all the long-term plans end up relying on scoring rules. You direct the CBO to assess a situation in which congress “isn’t allowed” to spend more than X on domestic programs or Y on the military or automatically applies cuts to hospitals. But giving the CBO those instructions doesn’t change anything in the world, it’s just an accounting exercise.

Excessive focus on these issues distracts crucial attention from meaningful budget questions which play out on a much shorter time frame. Right now, fiscal policy is set to be much too tight in 2013 with terrible growth effects that are being ignored by the political system. In 1993, fiscal policy was too loose and the president who cut the deficit didn’t get any credit from the deficit scolds because they were too busy worrying about long-term problems that the Clinton administration didn’t solve because they can’t be solved. To assess fiscal policy correctly, you have to get off the focus on the long-term and instead pay attention to what politicians actually control.

I’m not entirely unsympathetic to this view. I think we’d all benefit if those of us who advance ideas for how we might reform how government works in various domains acknowledged the uncertainties involved. To say that a more diverse educational marketplace that allows for more specialization and innovation would improve educational outcomes and restrain cost growth in K-12 is a conjecture — it is a well-founded conjecture, in my view, but it is a conjecture all the same. Where I might disagree with Matt is that I think the short-term can bleed into the long-term fairly quickly, e.g., there is a reasonable case to be made that the Social Security payroll tax cut has already forced hard choices regarding the program’s future, as Charles Blahous has argued.

One interesting example comes to mind: Gov. Scott Walker (R-WI) pressed the case for Act 10 as a response to a short-term fiscal crunch, yet as his critics argued, it was much more than that — it represented a broad effort to revise the terms of public employment in Wisconsin to give the state government and local governments greater flexibility in delivering public services. Public employee unions may well have been willing to make short-term concessions that could help mitigate the short-term fiscal crunch, but they were unwilling to cede their enormous structural power that would allow them to regain lost ground once the crunch passed, or once the federal government offered an infusion of borrowed money. Essentially, Walker pursued both tracks at once. And I think that’s a pretty good model for how to proceed. 

Both the Romney and Obama campaigns, however, have promised to delay structural reform and aggressive cost containment measures until long after they leave office, and so they are both susceptible to what I take to be Matt’s critique. 

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.