Deficits, Debt and Political Strategy

Posted on February 14, 2014 by


When Mr. Boehner announced his strategy Tuesday at a closed-door conference, no one objected, a senior House GOP aide said. He was halfway back to his seat when he said: “I got this monkey off your back and you’re not even going to applaud?” Lawmakers took the hint and gave him a round of applause. (Boehner Strategy Signals a Shift for Republicans, Wall Street Journal)

As I begin to write this post -US National Debt 2/14/14 10:33 am $17,291,754,103,236; US Unfunded Liabilities 2/14/14 10:33 am $127,866,325,757,259 (US Debt Clock).

Because the size of the US federal budget deficit has been declining over the last several months and years, the issue is now on the political back burner. However, there was a change in Republican strategy earlier this week on how to best address the deficit and national debt that nearly flew under the radar. On Wednesday legislation was passed to approve suspension of the federal debt limit through March 2015. The Republicans chose not to attach any legislation requiring spending cuts to the suspension of the federal debt ceiling. This is the first “clean” debt limit since 2009. We’ll hear no more political wrangling on this issue in the near future. Meanwhile we’ll continue to run a deficit and accumulate additional debt.

While there are a myriad of reasons why the Republican Party made this strategy change, it can be categorized as what is known as the shortsightedness effect. The shortsightedness effect is “the misallocation of resources that results because public-sector action is biased (1) in favor of proposals yielding clearly defined current benefits in exchange for difficult to identify future costs and (2) against proposals with clearly identifiable current costs that yield less concrete and less obvious future benefits.” (Gwartney, Stroup, Sobel and Macpherson Microeconomics 15 ed., p. 122) . This change in strategy may very well be effective in the long run, but in the shorter run it simply makes it easier for our federal government to continue to run consistent deficits leading to increasing our federal debt.  This provides a short run benefit for the Republican Party as we approach this election cycle, but imposes a long run cost to our nation as we continue to fail to address our spending problems.

As I complete the post -US National Debt 2/14/14 11:22 am $17,291,776,616,192; US Unfunded Liabilities 2/14/14 11:22 am $127,866,583,527,849 (US Debt Clock). The is an increase in US national debt of $22,112,956 and $257,770,590 in unfunded liabilities. The beat rolls on. What’s a quarter billion among friends?