Over at The American Prospect, a centrist democrat and a liberal (Will Marshall and Robert Kuttner) are proposing economic strategy for the Democrats, under the slogan “If these two can agree on a progressive strategy, so can you!”
I actually agree with a lot that they say – or where I disagree, it’s only because I think they don’t go far enough. (Then again, I’m to the left of both of them). But part 1 of their plan – entitled “Return fiscal sanity to Washington” – seems to me to cast the problem of an unbalanced budget in ways that make little sense.
Interest rates? Whatever you think of Bush’s economic policies, you can’t plausibly claim that the problem with them is that interest rates have been too high. (In fact, interest rates have been considerably lower under Bush than under Clinton.)
There’s then a bit about repealing “the Bush tax giveaways to families earning more than $200,000 a year,” which I fully agree with.
Next comes a discussion of “pork.”
What’s so bad about this? Pork projects improve the infrastructure of a community and create jobs.
Citizens Against Government Waste (an anti-tax group) says that pork projects in this highway bill will cost $11 billion over the next six years, or about $1.8 billion a year. (For comparison’s sake, the non-pork portion of the highway bill is about $264 billion, or $44 billion a year).
So what sort of projects are paid for by $1.8 billion a year? According to Citizens Against Government Waste:
-$3,000,000 to construct two Missouri bridges and their approach roadways in Nebraska;
-$3,000,000 for the construction of a bicycle/pedestrian bridge to connect the shores of the Salt River in Arizona;
-$2,000,000 for improvements to increase beach access, prevent storm drain failure, and accommodate increasing pedestrian traffic on The Stand in Manhattan Beach, California;
-$2,000,000 for a high-speed catamaran ferry in Massachusetts;
-$1,500,000 for the Henry Ford Museum in Michigan;
-$1,000,000 to restore and expand a maritime heritage site in Bristol, Rhode Island;
-$1,000,000 for a parking lot in San Diego, California;
-$1,000,000 to implement improvements for pedestrian safety in Bronx County, New York;
-$593,000 for a sidewalk revitalization project in downtown Eastman, Georgia;
-$500,000 to upgrade sidewalks, lighting and landscaping from Cherry Street
to Hampton Street in Montezuma, Georgia;
-$250,000 for the Blue Ridge Travel Association website;
-$200,000 for a parking lot in Oak Lawn, Illinois; and
-$50,000 for a feasibility study for platform mobile phone service in subway stations in New York, New York.
Okay, a quarter million dollars seems like waaay too much to spend on a website (although what do I know?). But other than that, these all seem like defensible projects to me. They create real improvements that will improve lives for people or help local economies, and they do so while creating jobs. What’s wrong with that?
Also, let’s keep a sense of scale about all this. The US Federal government spends over $2 trillion dollars a year; $1.8 billion is less than one-tenth of 1% of that. Pork in the highway bill is not the cause of our unbalanced budget.
* * *
There is, to my mind, a good reason to bring the budget into balance: because the less debt the US owes, the less of our taxes goes to paying interest on the debt. Paying interest is bad for the US in the exact same way it’s bad for consumers: if you have to borrow money to buy stuff, you end up paying more for that stuff. That’s true whether the stuff bought is a Playstation 2 on my VISA or an extended war in Iraq paid for by future generations. Pay-as-you-go is a cheaper, more effective use of tax money.
That said, it’s not the end of the world if we do go into debt. Sometimes it’s a good idea; we went into debt to buy our house, but in the long run that will (hopefully) turn out to be a sensible use of debt. Similarly, in a time of high unemployment, pork projects that create jobs and add value to communities may be worth going slightly further into debt for.
(Link to Prospect article via Matthew Yglesias).
UPDATE: Edited to add the phrase “in the highway bill” to one sentence; the first version of the sentence didn’t make it clear I was talking about pork in this one bill, not in the entire annual budget. Sorry about that.
UPDATE 2: Overall, according to CAGW, the annual pork bill is $2.29 billion, or a little over 1% of total federal spending. That’s not chump change, but neither is it a major cause of the deficit. (For comparison’s sake, Bush’s tax plan will cost the federal budget an average of $147 billion a year, or about 64 times what we’re spending on pork)..
not to mention, having some debt means that ordinary citizens can make some income off that debt if they invest in government bonds. so there are two ways to benefit from “pork,” as long as it doesn’t go too far.
I believe amper’s criticism regarding interest rates is flawed.
It is not the nominal interest rate that is important, it is the real interest rate, the interest rate after inflation is taken into account.
If you take a look at inflation, http://www.economagic.com/em-cgi/charter.exe/var/inflation-cpiu-dec2dec
you can see that while real interest rates are still very low today, they are about the same as they were in 1994.
We have very low interest rates now, but we have had a very long period of negative job growth. With a permanent increase in the budget deficit, we will have higher interest rates for any given level of economic activity. This harms long term growth, and therefore everyone’s income.
The massive budget deficit is not harmful for what it does this year, where a deficit can assist in economic recovery, but it will be harmful when full employment returns. A permanent commitment to budget deficits (tax cuts) will eventually translate into higher interest rates and slower economic growth.
Our current low interest rates are also subsidized by foreign states and individuals who have been willing to buy dollars, believing it is a good store of value. If they start to believe that the US is not a safe place to invest their money, our interest rates will increase dramatically. We can only keep their trust by making sound economic decisions that promote growth.
While it may cast the argument in a light difficult to understand, the possibility of high interest rates form deficits is a very good reason to return fiscal sanity.
Unlike going into debt to pay for infrastructure that gives beneficial returns, we are going into debt so that people with incomes above $200k can get indoor pools.
Ampersand also supports some “pork”.
What is objectionable about many of the pork projects is that they really should be local projects; they are not something the federal government should be involved in. A parking lot in Oak Lawn might be valuable, but mostly to the people of Oak Lawn, and probably very few people outside Illinois. The disconnect between the communities that gain from the project and those who pay (the federal taxpayer) encourages projects that the locals would not support if they had to pay for it themselves, and therefore are more likely inefficient (less valuable than their cost).
The pork system also is weighted towards states with disproportionate legislative power (low population states). A resident of California, I object to this practice.
It also encourages incumbency, because the longer a person is a legislator, generally the greater influence they have to get pork projects for their area. Our votes, and local political support, should not be influenced by the ability of a legislator to gain pork for their district. And to the extent that pork is awarded to the party currently in power, this also warps political influence. As a citizen of a liberal district my district should not suffer simply because Republicans control congress (any more than it has from non-pork Republican laws).
Every billion dollars spent on pork is one less billion dollars that could support early education programs, or any other highly valuable investment. National lead abatement? National project for broadband internet access? basic research into envromentally friendly technology?
Also the post is a bit misleading, the anti-tax website says there is $11billion of pork in the transportation bill, not all pork in government spending (which amper did make clear). But, to compare pork in this particular bill to the total government spending is inappropriate.
Well… I think the problem with pork isn’t just that it is (mildly) damaging to our economy. It is also damaging to our political system. Being a member of Congress no longer means working for the good of the nation, but trying to get money from the federal purse into your district. Basically, if you have 500 idealists who care about the country’s good and 500 corrupt hacks trying to get into the House of Representatives, a system without pork will mean that maybe 250 idealists and 250 corrupt hacks will be elected, based on their skill, campaign funds, etc. In a system WITH pork, maybe in the first election you’ll get the 250 idealists and 250 hacks, but in subsequent elections, the idealists’ districts will say, “hey, we’re losing money with this guy. He won’t wheel and deal to bring federal funds to us,” so only the most politically skilled idealists survive, leaving maybe 100 idealists and 400 corrupt hacks, and, even if the pork itself doesn’t do too much damage, the selection of politicians for their ability to bribe their districts irrespective of national interest is not a good thing, since such politicians also tend to come “bundles” with other traits that make them bad at ruling the country.
Mark:
There is a good argument that massive deficits are bad for real long-term interest rates, but to be fair to me, that’s not what the Prospect article I was responding to said.
Unlike going into debt to pay for infrastructure that gives beneficial returns, we are going into debt so that people with incomes above $200k can get indoor pools.
I certainly agree with you here.
What is objectionable about many of the pork projects is that they really should be local projects; they are not something the federal government should be involved in. A parking lot in Oak Lawn might be valuable, but mostly to the people of Oak Lawn, and probably very few people outside Illinois.
If the parking lot allows increased shopping, leading to increased incomes and more taxes paid, that benefits the Federal government, not just the local government. Furthermore, I for one have no objection to my tax dollars being used to help out the folks of Oak Lawn, so long as it’s a genuinely helpful project.
The disconnect between the communities that gain from the project and those who pay (the federal taxpayer) encourages projects that the locals would not support if they had to pay for it themselves, and therefore are more likely inefficient (less valuable than their cost).
Maybe, maybe not. It’s also possible that pork allows genuinely valuable projects that are too expensive for local communities to pay for alone to happen. Many of these projects are supported by a combination of state, local and federal funds, not by federal funds alone.
The pork system also is weighted towards states with disproportionate legislative power (low population states). A resident of California, I object to this practice.
That’s a problem with the legislative system as a whole, not with pork projects in particular. Similarly, the bitter partianship that has taken over congress, while it has warped the pork system, isn’t the fault of pork.
Our votes, and local political support, should not be influenced by the ability of a legislator to gain pork for their district.
Why not? Pork will only lead to increased votes if it actually improves the lives of voters. Improving the lives of voters is good; politicians should be rewarded for it.
Also the post is a bit misleading, the anti-tax website says there is $11billion of pork in the transportation bill, not all pork in government spending (which amper did make clear). But, to compare pork in this particular bill to the total government spending is inappropriate.
Thanks for pointing this out; I’ve edited the post to make it clear that I’m just talking about the highway bill.
Nonetheless, according to CAGW, the total pork in 2004’s budget is $2.29 billion, or about 1% of Federal spending. You’re fooling yourself if you think that a relatively paltry $2.29 billion in pork is the reason that No Child Left Behind or the other projects you mention are underfunded. And, frankly, many of the projects being funded seem at least as worthwhile to me as national broadband internet.
Julian, I disagree with you that wanting to help projects in your local community is inherantly non-idealistic. I don’t think it’s corrupt, or wrong, for the Federal government to help out with local projects, so long as the local projects are genuinely worthwhile (either due to their inherant value, or due to their worth as investments or infrastructure).
Well, we can disagree over the specifics of what pork is, but surely you must acknowledge that there are government programs that are not good for our country: program oriented toward benefiting privileged and powerful minorities at the expense of the country as a whole. I can’t imagine that you think every government program is right and good. Agricultural subsidies to the wealthiest farmers might be cited, for one instance. My contention is that the cost of these programs isn’t just in the (fairly modest) costs to the economy and federal budget, but in the sort of politicians they support. Don’t you think that we would all be happier today if Halliburton, Enron, and other companies hadn’t supported politicians like George W. Bush in exchange for government support of their enterprises? The problem is, if the government is susceptible to such corruption, it creates a reason for both companies and politicians to play the game. You may not think that the bridges in Missouri are pork, but surely you think that there is such a thing as corruption the the Federal budget?
I am not an economist, but this is to the best of my knowledge.
To be sure, whether or not deficits increase interest rates is still being debated. According to theory, deficits should increase rates, because the more government borrowing there is, the more borrowers there are competing for lender dollars, and thus the higher the interest rate borrowers have to pay.
However, many say the evidence doesn’t back it up. However, so many other things affect interest rates (primarily inflation, which has been really low due to the recession) that it’s really hard to say definitively either way. It could merely be that the effect of deficits is real, but is not significant enough to matter compared to other factors.
But I think one thing is obvious. Deficits increase future taxes. To me, that is reason enough to balance the budget.
You might need another update to your update. If 1.8 billion is less than one tenth of 1% of the budget, then 2.29 billion is not just over 1% of the budget. Either the 2+ billion figure is wrong and it should be 22.9 billion, or it is just over one tenth of 1%.
The problem with pork is not that federal money is going to build a parking lot in Oak Lawn or to set up a web site for the Blue Ridge Mountains. The non-pork portion of the transportation budget goes to exactly the same sort of projects. The problem is that these particular projects are much less likely to have been selected on the basis of legitimate merit than they are to have been selected on the basis of political need by particular members of congress. Somebody needed some additional votes in Oak Lawn, so Oak Lawn gets a parking lot.
Of course, you are right that this has nothing to do with fiscal constraint. We could spend exactly as much money and have no pork, or we could spend half as much federal money on transportation, and have it all distributed as pork.
“What’s so bad about this? Pork projects improve the infrastructure of a community and create jobs.”
This kind of thinking is a large part of the bloody problem.
If Portland, Oregon wants a light rail system, or if West Virginia needs a few more rural roads, or if Maine needs more money for the state colleges, then by god it should be up to local and state politicians to raise the taxes to do it and handle it themselves. Tax payers in Chicago shouldn’t have to pay for any of those. More and more things are being pushed to the federal level and the fiscal consequences are unnoticed because Washington has this large pot of phony “play money” in which everyone is grabbing as much as they can for their constituents in order to get reelected to get more money. It’s crazy. Most of these things can and should be taken care of at the state or county or city level if local politicians had fortitude to take the responsibility for their own policies.
Think about it. Why should the Jack Dumbass in Portland send his tax $1.00 to Washington –> have the federal bureaucracy take a huge cut for administration –> and have the leftover $0.45 sent back to Oregon to help build the rail system. Its stupid, horribly inefficient and really not much more than a federal bureaucracy jobs program. If the federal government wasn’t so bloated and over-reaching more money could be raised locally to do these things much more efficiently.
Sample patter:
“Why should the Jack Dumbass in Portland send his tax $1.00 to Washington –> have the federal bureaucracy take a huge cut for administration –> and have the leftover $0.45 sent back to Oregon to help build the rail system.”
Ummm, because Chicago is part of the same country (society) as Portland, West Virginia and Maine? Because benefits to Portland, West Virginia and Maine benefit the country (society) as a whole? Because rural West Virginia couldn’t afford to pay for the roads on their own? For the same reason the Fedgov mandates that utilities must run their services to unprofitable rural areas? Because part of being a decent human being is caring about other members of one’s society, even in cases where one does not directly receive the benefits (like Medicaid)?
Just a few guesses that might answer those questions. If you don’t like it, you can always move to any of several Central American countries that seem to work your preferred mode of taxes. (Gosh, I’ve always wanted to use sort of line.)
Jake Squid: “Ummm, because Chicago is part of the same country (society) as Portland, West Virginia and Maine? Because benefits to Portland, West Virginia and Maine benefit the country (society) as a whole? Because rural West Virginia couldn’t afford to pay for the roads on their own? For the same reason the Fedgov mandates that utilities must run their services to unprofitable rural areas? Because part of being a decent human being is caring about other members of one’s society, even in cases where one does not directly receive the benefits (like Medicaid)?”
BS. We are the United STATES of America where each state has a large degree of sovereignty and responsibility for its own residents. Not everything is a federal concern (or it’s business).
Part of being a SMART, “decent human being” is realizing that when you take a dollar out of a tax paying citizen you could be taking a dollar out of a child’s college fund, or health care premium, or auto insurance, or mortgage payment, or retirement fund. So SMART, decent human beings realize even though taxes are a neccessary evil and government owes it’s governed to make the most efficient use of tax dollars as it can. Therefore, generally the more local a need can be served the more efficiently the tax dollar can be used the less tax money needs to be taken out of an individual’s grocery money.
Not to belabor the point….. Well, yes. To belabor the point.
Under your desired system, Larry, how does electricity or phone service get to Appalachia? How do roads get built to connect the residents of Unknown Town, Montana to the rest of the country? Are you a citizen of the USA or a citizen of your home state or both? Does it affect you if neighboring state A’s economy tanks? Can you see that roads connecting the towns and cities of Maine ARE beneficial to the US as a whole?
Yes, it would be nice if tax dollars were to be used more efficiently. Just because there is waste doesn’t mean that we should cut federal funding to seemingly local projects. Or Medicaid.
Honestly, most Central American countries operate under the sort of tax & tax distribution system you seem to be advocating. Scandanavia, on the other hand, uses federal money to pay for a whole host of things that don’t benefit the taxpayer directly.
I’m done, but I’m sure your answers to these questions will go a long way towards showing, even more than your last post, how caring you are for fellow members of your society.
Jake Squid: “Under your desired system, Larry, how does electricity or phone service get to Appalachia?”
My desired system? Just curious, but what country are you from? Because over here in the states that is the way the government was designed. You see, we in the USA had at one time this document called “The Constitution” that limited federal power pretty nicely up until it’s bastardization last century.
How about the West Virginia legislature (for instance) pass bill that will raise taxes for a couple of years until the project can be completed then the Governor can sign it and implement it. That doesn’t seem so difficult now does it? Well, maybe it is since Sen. Byrd wouldn’t get his name on a power plant building.
Look I have no problem with federal dollars going to highways connecting states since that DIRECTLY promotes interstate commerce which is covered in the constitution. But read the document and come back and defend a god damned parking lot in San Diego being passed in a federal bill?
Jake Squid: “I’m done, but I’m sure your answers to these questions will go a long way towards showing, even more than your last post, how caring you are for fellow members of your society.”
Is “caring” really the only threshold for whether to do something or not? How is this for caring:
1. How can a caring person let someone go without food and clothing? Why even take the chance that it will happen? So lets make all food free and clothing free. That would be extremely caring wouldn’t it?
2. We can’t have anyone without a roof over their head so lets give everyone a government issued house.
3. There is more to life that a place to stay and food in your belly so everyone will have the option for a government provided job.
4. If we are really caring we need to realize that most people will need a car to get to work and the government food distribution centers so we need to provide everyone with a government issued car.
5. Then when the economy collapses we can all starve together and die knowing that we really, really cared for our “fellow members of society”.
Ah, you’ve found my weakness. Can’t resist….any…..longer.
“Then when the economy collapses we can all starve together and die knowing that we really, really cared for our “fellow members of society”.”
Like has happened in Scandinavia. It’s a pity that their economy collapsed in Sweden and they’ve all starved & died together. But at least they knew that they really cared for their fellow members of society. I truly mourn the passing of the Swedes and Sweden. As I mourned the Norwegians & Norway before them. And as I mourned the Danish & Denmark before that. So many misguided societies lost to bad decisions in terms of social welfare. They shined so brightly, yet now they’re extinct as the dodo. The fools. If only they’d each learned to look out for number 1 they could have reached the heights of the Costa Rican society and economy. Let this serve as a warning to New Zealand.
Wow! Food, clothing, cars, houses and jobs are all government provided in Scandinavia? They rock!
(Yawn)
Pearls before swine, my dear Jake.
Stupid spammer, tricks are for kids.
A lot of the projects cited may be good ones. That new parking facility may in fact allow a local employer to expand his or her business and add new employees.
However, as a grantwriter, I’m not terribly fond of pork. Projects get funded because of who you know and what seniority your senator has then, rather than on the merits of the project.
If you were writing a grant application, you’d have to demonstrate that the parking lot would allow employers X, Y and Z to expand in your downtown area, thereby generating ### jobs. As opposed to the project where you’re building a new parking lot because the mayor thinks it’s a neat idea, or his sister-in-law runs a excavating company and so forth, so he contacts Senator Blowhard to get him the money.
First of all, Marshall Whitman is not a centrist Democrat, he’s a movement conservative who just happens to be disgusted with the corruption that currently infests the Republican Party. It’s not that long ago that he proudly said so.
Secondly, the federal money you’re talking about is being used to reward states that don’t spend their own money on their communities, because they refuse to raise taxes.
Who is paying for this pork? Other states that have healthier economies because they are willing to spend the money on their own infrastructure.
Those other states, by and large, are “blue” states that benefit from liberal polices and therefore elect Democrats. Part of movement conservatism’s program is to punish those states by taking money from them and giving it only to “red” states where possible.