ru·mi·nate verb \ˈrü-mə-ˌnāt\ Definitions:
1. To consider something deeply and carefully.
2. To re-chew partially digested food.
There isn’t a more perfect word than ruminate for what all of us ought to be doing this month regarding the looming “Fiscal Cliff.” Per the first definition of the word, there’s sure plenty to think deeply about.
From a pure economics perspective, what is the most effective thing to do? Raise tax rates? (On who?) Cut spending? (On what?) Do both? (In what proportion?) Will higher tax rates really gather more tax revenues, or will taxpayers change their financial behaviors?
Hayekians (followers of economist Friedrich A. Hayek, 1899-1992) are pragmatic realists who subscribe to a constrained view of limited government intervention into the economy. (Suggested reading)
Keynesians (followers of economist John M. Keynes, 1883-1946) are idealistic statists who subscribe to an unconstrained view of expansive government manipulation of the economy. (Suggested reading)
Economics aside, the political strategy questions seem endless:
- Did the 2012 election give either party a mandate for a course of action?
- Why did American voters essentially preserve the status quo in the Federal control of power?
- Are the battle lines of partisan politicians artificially exaggerated by a dysfunctional political process, or are they simply a reflection of a deeply divided American population?
- Is divided government a blessing or a curse?
- Are both sides following courses of action based on their honest notion of “doing the right thing”, or based upon a motivation to avoid getting blamed for the (likely) inevitable economic meltdown?
- How did Republicans get themselves in a position where, if no further legislation is passed this month, the default outcome in 2013 and beyond will be so undesirable to their constituents?
Each of these questions are great fodder for entire articles. I invite your comments on them. Pick a question, and give your view….
But let’s move on to the second definition of ruminate: “To re-chew partially digested food.”
Remember the bipartisan National Commission on Fiscal Responsibility and Reform? Here’s a quote from a short summary of the Commission and the Plan:
“In February of 2010, President Obama issued an executive order creating a commission to study the debt crisis in the US and offer a proposal to solve the problem. The committee formed from that order had 18 members, some were appointed by the President, and some were selected from Congress. The President appointed two Republicans and five Democrats. Among those people were two co-chairs: former Senator Alan Simpson and former White House Chief of Staff Erskine Bowles….
Three Republican Senators were chosen along with three Democrats. The same numbers were chosen from the House. The committee divided itself up into three working groups with each member assigned to two groups. These groups included one to study tax reform, one to study discretionary spending, and one to study mandatory spending.
On November 1, 2010 the committee submitted its final report making recommendations on discretionary spending, tax reform, health care savings, social security, and other mandatory programs. The plan needed a super-majority to be officially supported by the committee, but on December 3, 2010 it received only 11 of the 14 votes needed.”
Three Republicans — Paul Ryan (WI), Jeb Hensarling (TX), and Dave Camp (MI) — voted against it because it sought to raise tax rates during a recession and didn’t do much to curb health-care spending.
Now there are many conservative strategists and pundits who feel that re-chewing the Simpson-Bowles cud is the best course of action. My favorite article along these lines is Learning to Love Simpson-Bowles from 26 Nov 2012 by Randall Hoven at AmericanThinker.com.
Even if you don’t click on any other links in this article, you absolutely must read Mr. Hoven’s article. He lays out the Republicans’ options, and maps the hypothetical outcomes of each option. He concludes the best conservative approach that’s realistically available is for Republican legislators to return to the Simpson-Bowles Plan and have Ryan, Hensarling, and Camp endorse it. This puts the Democrats in a position where they must either reject that ready-to-go plan and propose their own plan (and clearly own the blame for the consequences), or accept the Simpson-Bowles Plan as-is, which is a better course for the economy than the default Fiscal Cliff.
Here is Mr. Hoven’s conclusion:
“There is no way we can get what we want. But the worst of both worlds is to get bad policy and get blamed for it. The beauty of Simpson-Bowles at this point is that it probably won’t pass in any case, but even the Keystone Republicans should be able to play it in the media in a way that puts the blame on Democrats if they kill it.
And if worst comes to worst, it might actually pass. But if it does, it would mean smaller government than the other feasible alternatives. And isn’t that what we’re about? Don’t worry about higher [tax rates]; the government will never collect them.”
And here’s my own final idea to ruminate on:
If any of your family, friends, or coworkers are named Cliff, how in the world can you pass up the chance to nickname them “Fiscal” this month?