NATIONAL (IRRATIONAL) TEA BAG DAY

Today is the deadline for filing federal income taxes. Today is also National Tea Bag Day, a protest movement against … what? Taxes? Federal spending? Bigger government?  One of my blogging friends may or may not be carrying his tea bags today, but big government is definitely on his mind. In a recent post on Why Government Expands, Open Minded Republican writes:

Largely, it really doesn't matter whether people believe in large government or not, because it will always expand regardless (…) The answer is much simpler and harder to address. People are elected to 'do something'. For the purposes of this discussion, what they are elected to do is irrelevant. It is the 'do something' itself that matters.

Fair enough. Had the article contained the usual partisan attack clichés about “tax and spend liberals,” I would have rejoined: Republican administrations incurred $9 of the $11 trillion in sovereign debt … squandered away a trillion dollar budget surplus … and started the Iraq war on borrowed money.  But Open Minded Republican framed his hypothesis in non-partisan terms. Have we progressed to the point where we can hold a reasonable and civil conversation without recrimination? Octopus should mind his manners, and readers may ignore these remarks.

Lets look at the merits of OMR’s hypothesis. The premise that government expands regardless of which party is in charge misses a point. In essence, OMR makes the expansion of government appear as if this were a naturally occurring phenomenon … like the expansion of the Universe after the Big Bang. In other words, OMR offers an entropy model as a fig leaf for polite discussion. Does a fig leaf constitute a viable hypothesis? There is nothing self-evident about the expansion of the Universe or government. Herein resides a problem of logic called the mystification fallacy, as defined by Octopus:

No matter how intelligent we think we are, or how diligent our method of inquiry, there will always be events and situations we do not understand. One response is to attribute supernatural or mystical causes to phenomena that are beyond understanding. Perhaps some events are truly random. Nevertheless, to assert that something is unknowable is to halt all inquiry, whether the thing is knowable or not. In every academic discipline, there is always an article of faith that states: Everything is potentially knowable.

To rephrase the question, can we describe big government adequately in terms of spending, or deficits, or public debt as a percentage of GDP as if these were phenomena lacking cause and effect?

Perhaps the expansion of government has multiple causes depending upon where one looks. Sometimes government expands to mobilize for war or in times of economic turmoil. There are times when government spending is a natural consequence of prosperity, when tax receipts rise along with expectations, and strategic decisions are made about the future direction of the nation. No doubt, earmarks deserve a sentence or two, since there will always be stakeholders competing for a share of the public pie.

When our attention should be focused on the economy, is there a hidden card tucked inside the sleeve of OMR's argument? In other words, trickle-down versus trickle-up?

Every recession replays the same old drama. Business sheds workers when sales revenues decline. Nervous consumers spend less on goods and services … causing business to lay-off more workers. As fear cascades through the economy, the rate of contraction quickens and deepens. For this recession, the stats are grim: unemployment has risen 8.5%, the economy has contracted 6.5%, equity markets are off 40%, and credit has all but disappeared. Bottom line: when businesses and consumers can no longer bear the load, the stimulus of last resort is the federal government.

What are our policy options? Spend trillions of dollars on a stimulus plan, or lose the same trillions in falling tax revenues? Yes, that’s right. Local, state, and federal government will spend or lose trillions either way.  Stimulus spending will increase public debt; doing nothing will accelerate the rate of economic decline. Given this Hobson’s choice, one wonders why we are even having a debate.

Yesterday, President Obama tried to address these concerns in a speech that deserved far more press attention. On the subject of bank bailouts, he says:

… whether we like it or not, history has shown repeatedly that when nations do not take early and aggressive action to get credit flowing again, they have crises that last years and years instead of months and months -- years of low growth, years of low job creation, years of low investment, all of which cost these nations far more than a course of bold, upfront action.

On the subject of direct rebates to taxpayers, President Obama says:

… the truth is that a dollar of capital in a bank can actually result in $8 or $10 of loans to families and businesses. So that's a multiplier effect that can ultimately lead to a faster pace of economic growth.

Finally, he speaks about strategic policies to secure a better future:

Number one, new rules for Wall Street that will reward drive and innovation, not reckless risk-taking; number two, new investments in education that will make our workforce more skilled and competitive; number three, new investments in renewable energy and technology that will create new jobs and new industries; number four, new investments in health care that will cut costs for families and businesses; and number five, new savings in our federal budget that will bring down the debt for future generations.

Under the last administration, national debt doubled from 5.5 to 11 trillion dollars; yet, we have nothing to show for it. We still have a crumbling infrastructure, a broken healthcare system, and no national energy policy to make us energy independent. But we do have National Tempest in a Tea Bag Day for every Joe the Dumber who thinks he will someday make mega-millions, tax-exempt and Heaven-sent. Meanwhile, my “open minded” Republican friend wants to start a conversation without starting an argument. I welcome this conversation. Now, what do you want to talk about?