A Year of Magical Thinking

So, in a few days we begin the new political year. I'll be involved, again, with council. It'll be my last year (unless something VERY strange happens) as my tenure runs out 12-31-2011. With our own local budget, we have been lucky. Last year tax revenues came in higher than expected (not by much, but at least more than we originally budgeted). While it was a rough year, and we are severely ignoring some long term issues, we ended in the black. I'm saying this so you know I have some experience with budget austerity.

Then we look at the national issues. In a few days a new congress will be sworn in. A congress that has already shaped the national dialog. And here's where the magic comes in.

There was a lot of breast beating about the deficit and debt the past two years. And activists on the "ZOMG We're Going to Hell in a Handbasket" side made a change in the political landscape and helped usher in a new Freshman Congressional Class that leans heavily toward the Conservative end of the political spectrum. So you'd think things would get better, wouldn't you.

But what's the major victory so far? Extension of all the budget busting Bush-era tax cuts. You know, the ones that took us from budget surpluses (that were being used to reduce the long term debt) to record deficits. And now those same conservatives are running the line about how tax cuts don't have to be offset in the budget. As Paul Krugman opined, "Then why not just cut all taxes?"

Now, somehow, with lowered revenues, we're going to budget cut our way to fiscal prosperity but without having defense or medicare on the table. Yeah, almost forgot, we're also going to roll-back (or at least defund) the Obama HCR Act. You know, the legislation that will actually reduce our deficit in the long run. It's what's known as magical thinking. There's this mindset that there's a whole army of federal employees that can be cut from the rolls, we can outsource some functions, and other nonsense that has no basis in reality.

Obama announced a pay freeze for all federal employees in the coming year. It will save use $35 billion for the next ten years. With annual budgets over $1.3 Trillion, that's almost a magnitude of a rounding error. Also, we now have over a decade and a half's experience with outsourcing government functions (Medicare Advantage, IRS Debt Collections and Processing, Federal Student Loans, etc.). None (absolutely none) of those have saved us money. In fact, they have cost us on average 14% more than if we had kept those functions within the Federal Government (including all the new employees, buildings, and capital expenditures that would entail). In fact, the Medicare Advantage overpayments were enshrined in law by those same conservatives who talk about how much we can save by outsourcing (and it's where the majority of medicare savings will come from in the new HCR Act, by changing those mandated overpayments).

Let's not even start on the insanity of the new budgeting rules. You know, how tax cuts don't have to be offset, but any other spending increases need to be offset by cuts elsewhere (not by revenue increases - ie. tax increases or in reality, closing tax loops holes). But then, this is also by the party that likes to say we have the highest taxes in the world when even if you look at our nominal rates, we're in the lowest 15 (depending on your income) and for effective rates (after all the deductions, etc, and including all the taxes other countries collect, like VAT) we're the third lowest in the world. Because it's not about reality, it's about feeding on the fears and disgruntled (such as the new tax service who's commercial talks about how the IRS will take advantage of you for not knowing the rules, which they're forbidden by law for doing - okay, well, it's one of those complaints against the private contractor the IRS was forced to use, by the conservatives again, and has lead to record findings against the IRS because of the contractor's incompetence, which leads to their 22% higher cost of operation).

So all the ideas they're floating have been shown, with historical data, to do absolutely nothing to reduce the deficit. Including the canards of "reduce tax levels increase tax revenues" and "giving tax breaks to the top 1% increases employment" have been shown to be false.

But, I'm sure, if we just try one more time and really believe, this time it will work. We just need to clap harder and faster to bring Tinkerbell back.

And have I mentioned I've already heard the argument of how the new congress won't be able to do anything, so no changes will get done, and how that's a good thing. Coming from the same people who last year complained about how nothing was being done to increase employment and the government's/Obama's main focus should be that. (However, all that's a smoke screen and is basically saying "We don't want the current administration to roll back any of our Social Conservative advances")

So, welcome to the year of magical thinking. Thank Brid that the economy has actually been on the mend this past year (again, disproving the whole argument about how the Stimulus and Bailouts did nothing). Hopefully the new Congress won't screw it up too much.