Hard News by Russell Brown

Unenlightened self-interest

At election time in a modern economy such as ours, the USA's multi-trillion dollar projected fiscal deficits would be a massive, screaming, huge issue. Although the incumbent might seek to play down such a fiscal crisis, you'd expect someone to enter the game with a painful-but-necessary solution.

No such luck. Kerry is trying to make Bush's deficits an issue, but has no serious plan to haul them back. Bush is not just ignoring the problem, but campaigning on policies that would more than double the 10-year deficit. This Los Angeles Times story lays out the grim reality:

Independent budget experts say the size of this year's shortfall is less important than the long-term budgetary outlook. Although both presidential candidates state their intent to reduce the deficit as a percentage of the economy, neither one is offering a plan for putting the federal budget back in the black.

The CBO said it did not attempt to estimate the budgetary effect of Kerry's campaign proposals. The Democratic nominee wants to extend most of Bush's tax cuts for the middle class but rescind those for wealthier taxpayers. Yet several independent economists have said that any savings that would accrue would probably be offset by Kerry's proposals to increase spending on healthcare and education.

Robert Greenstein, director of the liberal Center for Budget and Policy Priorities, said it appeared that the 10-year cost of Bush's economic platform was slightly greater than the cost of Kerry's campaign promises. "But under both sets of proposals, the nation would face significant problems over the next 10 years and beyond," he said.

Although faster-than-expected economic expansion might trim the long-term deficit, CBO Director Douglas Holtz-Eakin said it would be next to impossible for the nation to grow its way out of deficit spending.

Even if Bush's tax cuts were allowed to expire and nothing was done about the alternative minimum tax, the looming retirement of the baby boom generation would cause deficits to swell as Social Security and Medicare trust funds were gradually depleted, he said.

That last paragraph is particularly apposite. Although the US is hardly alone in having a looming retirement crisis, it is notable for the way that crisis is virtually ignored at the political level. We might not have a solution in this country, but we've tried. We've looked at hard options. We even have, now, a degree of cross-party support for the savings plan embodied in the "Cullen fund". On the other hand, check out Robert Samuelson in the Washington Post:

These are hard issues. But they are harder today because we didn't face them yesterday, and they will be harder tomorrow because we're not facing them today. Our lack of candor makes them worse. Prodded by Bush, Congress last year extended Medicare coverage to drugs. This significantly increased Medicare's long-term costs. Hardly anyone asked the basic question: Why should younger people, who need to pay for diapers and mortgages, be forced to pay for older people's drugs? People at different life stages have different costs. There was a case for coverage of catastrophic drug costs, though not ordinary costs.

Bush and Kerry practice and perpetuate this national denial. The longer benefit cuts are postponed, the more likely it is that Congress will be forced to make abrupt and unfair cuts for current recipients even while raising taxes. Bush deserves to lose the election based on his cynical Medicare drug plan, designed to attract elderly voters. But Kerry does not deserve to win, based on his equally cynical pandering to the same voters.

How does this happen? Thanks to Christiaan Briggs for alerting me to this story in the New Yorker, which looks at recent research into how and why Americans vote the way they do. It's worth reading in its entirety, but here are some excerpts:

But, after analyzing the results of surveys conducted over time, in which people tended to give different and randomly inconsistent answers to the same questions, Converse concluded that “very substantial portions of the public” hold opinions that are essentially meaningless—off-the-top-of-the-head responses to questions they have never thought about, derived from no underlying set of principles. These people might as well base their political choices on the weather. And, in fact, many of them do …

Seventy per cent of Americans cannot name their senators or their congressman. Forty-nine per cent believe that the President has the power to suspend the Constitution. Only about thirty per cent name an issue when they explain why they voted the way they did, and only a fifth hold consistent opinions on issues over time. Rephrasing poll questions reveals that many people don’t understand the issues that they have just offered an opinion on. According to polls conducted in 1987 and 1989, for example, between twenty and twenty-five per cent of the public thinks that too little is being spent on welfare, and between sixty-three and sixty-five per cent feels that too little is being spent on assistance to the poor.

And voters apparently do punish politicians for acts of God. In a paper written in 2004, the Princeton political scientists Christopher Achen and Larry Bartels estimate that “2.8 million people voted against Al Gore in 2000 because their states were too dry or too wet” as a consequence of that year’s weather patterns. Achen and Bartels think that these voters cost Gore seven states, any one of which would have given him the election …

When people are asked whether they favor Bush’s policy of repealing the estate tax, two-thirds say yes - even though the estate tax affects only the wealthiest one or two per cent of the population. Ninety-eight per cent of Americans do not leave estates large enough for the tax to kick in. But people have some notion - Bartels refers to it as “unenlightened self-interest” - that they will be better off if the tax is repealed.

What is most remarkable about this opinion is that it is unconstrained by other beliefs. Repeal is supported by sixty-six per cent of people who believe that the income gap between the richest and the poorest Americans has increased in recent decades, and that this is a bad thing. And it’s supported by sixty-eight per cent of people who say that the rich pay too little in taxes. Most Americans simply do not make a connection between tax policy and the over-all economic condition of the country. Whatever heuristic they are using, it is definitely not doing the math for them. This helps make sense of the fact that the world’s greatest democracy has an electorate that continually “chooses” to transfer more and more wealth to a smaller and smaller fraction of itself.

It's ironic that the nation which generates such vitality in business, technology and culture is stuck with an electoral system and political environment which is so badly broken. The elites argue the toss, half of eligible voters don't bother, and some of those who do seem to make their choices on grounds that border on the infantile. I just wish the rest of us didn't have to live with it.

We can always pretend. Thanks very much to Martin Hermans for directing me to betavote.com, which is based on the premise: "What if the whole world could vote in the U.S. presidential election?". Not unexpectedly, Kerry would romp home. Wholly unscientific, of course, but good fun. By all means, cast your ballot and we'll see if New Zealand can beat Finland for "turnout".

Back on the local front, David Farrar is accusing the Herald of bias for running the rule over John Banks' claimed list of "achievements". Given that Banks is not just loudly running on his record, but claiming that his council has "achieved more than any council in living memory", this would seem to be a matter of the newspaper simply doing its job. I presume David would be up in arms if Helen Clark claimed credit for a list of National government initiatives (including those her party had actively opposed) and had her claims faithfully relayed in the Herald. I don't see why this is any different.

And David's expectation of a matching "expose of who actually does what with Hubbard Foods" is just silly. No one's asking Banks to open the books of his private businesses. The issue is what he's done in the job for which he is seeking re-election.

Meanwhile, Dick Hubbard finally has a campaign website, and written policies - all two of them - with more policy to come next Tuesday. As I expected he would, he's given himself a sensible out on the Eastern Corridor: it has to meet "the appropriate cost benefit analysis - which has yet to be seen." A key point of distinction with the incumbent is that Hubbard appears to know what an apostrophe is.

Quite a few people have emailed me about broadcaster Tim O'Brien's online campaign for the Wellington mayoralty. It's great: video and audio statements from the candidate, a campaign diary, a published campaign itinerary, policy points, links, and even an explanation of the new STV voting system (I really wish we had that in Auckland). But dammit, I'd vote for him on the strength of Fat Freddy's Drop playing at his launch on Sunday …

And, finally, Sideswipe is making merry this morning with the story of a Hell Pizza flyer offering promotional discounts that were news to actual Hell Pizza outlets. But perhaps it would be wise not to point the finger too readily. Herald-subscribing reader Catherine says she got a promotional mail-out offering "Four Easy Options to try the new Herald on Sunday for free (oh, and win $10K of an Ultimate Outdoor Room). So I go online to do my thing and can't find anything that even mentions the fine new organ, let alone how to upgrade subscriptions. So I write them a note and I get this note back …"

Dear Catherine

Thank you for your email.

The promotion does not say anywhere you can upgrade your subscription to the Herald on Sunday online.

As mentioned in the promotion you need to phone 0800 100 888 to subscribe to the Herald on Sunday.

Kind regards …

"Thing is," says Catherine, "The 0800 number they mention isn't even the same one as that on the letter (cos, being petty, I had to rummage through my garbage to find it). Meantime. I've snail mailed using option 1. D'ya reckon the marketing people and all the folks who've spent $$$ developing this product would weep if they knew the response?"