The Federal Budget Is The March of Folly

The late historian Barbara Tuchman described the ineptness of government decision-making in her book, The March of Folly: From Troy to Vietnam. She wrote: “Mankind, it seems, makes a poorer performance of government than of almost any other human activity. In this sphere, wisdom, which may be defined as the exercise of judgment acting on experience, common sense and available information, is less operative and more frustrated than it should be. Why do holders of high office so often act contrary to the way reason points and enlightened self-interests suggests? Why does intelligent process seem so often not to function?”

And so it goes with our current economic mess. Why, indeed, did so many high office holders act contrary to the way reason and enlightened self-interest suggest?

There was ample warning that the debt ceiling fight would make our problems worse, yet strident lawmakers ignored common sense, self-interest and plunged ahead. So the stock market dives and the United States will pay a penalty for folly.

Too many lawmakers and Tea Party supporters blame President Barack Obama for spending our way into oblivion when the simple truth is that more of us live longer making it impossible for any nation to pay the benefits once promised. We have a long-term challenge, not an immediate one. The challenge of rebalancing our  demographics -- serving a population that is growing older with entitlement programs and health care -- is a global concern, not just an American one. This accounts for most of our spending problems. Period.

Yet now, backed by the Budget Control Act, the Committee to Cut The Hell Out Federal Spending, (officially, the Joint Committee on Deficit Reduction) will tear into a fraction of the U.S. budget, domestic discretionary spending, and pretend that’s the issue at hand. (To be fair: Defenseis on the table. And if no deal is reached by the Joint Committee, then military cuts could be significant.)

One bit of “good” news. Under this law the Indian Health Service budget cannot be cut by more than 2 percent, roughly the same as other Medicare providers. But other programs serving American Indians and Alaska Natives could be wiped out. We’ll know more once the Joint Committee finishes its report (a target list?) before December 2.

Only one line item is guaranteed to have all the funding it needs: Interest on the debt. That budget line, determined by bonds and other instruments, is an expense that’s determined by markets, not the government. (Here is a twist worth noting: the U.S. has been paying less in interest in 2010 than it did in either 2008 or 2007 because of favorable rates.)

That’s why self-interest matters. The United States should have resolved to keep interest rates low while it managed through its long-term debt issues.

But the new course represents the ultimate folly.  It’s as if we want to pay more in interest. The new law also shifts difficult decision-making into an automatic mode, pretending that difficult decisions about what’s important are somehow made and implemented without legislative responsibility. What’s more, the Budget Control Act has the force of law even though economic conditions (as predicted) have changed. The fall in stock markets means there’s less tax revenue and other resources available to a government that’s moving into a full contraction mode. That, in turn, will mean more budget cuts, reducing jobs even further. By next summer we will look back at 9 percent unemployment with a fondness for better days.

The Economic Policy Institute estimates that the current emphasis on contraction could cost 1.8 million jobs “that will only contribute to a slower, more painful recovery in the long run.”

Last week National Congress of American Indians President Jefferson Keel called on Congress to appoint members to the Joint Committee who “are well versed in the federal trust responsibility to Indian tribes.”

Of course that would be the ideal because then it would make sense to invest in basic infrastructure and seed programs to actually grow the economy. But the March of Folly has already begun. Instead of trying to grow our economy, the law in place says we will shrink and shrink government until our debts are paid off. Logic be damned. We are determined to move forward without intelligent process.