A Fiscal Policy Speech to Make My Mom Proud

When I was growing up my mother made a concerted effort to drive home the idea that choices have consequences. My sister and I were dense, maybe because we were kids, or maybe because we were just dense, so lessons that conveyed that idea had to be delivered with blunt force to penetrate our self-involved, adolescent minds. Like, the time she was taking me to school for the third or so day in a row because I had missed my bus. My normally lead-footed mother became a law-abiding driver and took deliberate care to drive UNDER the speed limit. After appeals that she drive faster so that I wouldn't arrive after the tardy bell and get detention, she began to stop for yellow lights. I got detention. And I never missed the bus again. 

In his speech yesterday outlining his plan to reduce the deficit, President Obama emphasized that deficit reduction isn't an outcome represented by the dollar value of revenue raised or spending cut; it's the sum of the choices made to get there. And responsible decision making considers the trade-offs between making one choice or another. To illustrate his point, he referenced the deficit reduction proposal (aka FY 2012 budget resolution) authored by Paul Ryan (R-WI), the chairman of the House Budget committee.

"In the last decade, the average income of the bottom 90 percent of all working Americans actually declined.  Meanwhile, the top 1 percent saw their income rise by an average of more than a quarter of a million dollars each. That’s who needs to pay less taxes?

They want to give people like me a $200,000 tax cut that’s paid for by asking 33 seniors each to pay $6,000 more in health costs.  That’s not right. And it’s not going to happen as long as I’m President."

One of the things his remarks make clear is that the debate over the deficit has moved past the "should we?" (maybe it's more cyclical than structural and given a sufficient period of economic growth it'll work itself out) or "when should we?" (put in immediate cost cutting measures or wait until the economy is less fragile lest we risk a double-dip) to the "how should we?" And, although he detailed a few specifics, I think is purpose was to define an approach, one that recognizes both sides of the ledger and that cuts on one side don't just leave a negative space in the shape of what was previously there. In his example, cutting taxes for those at the high end results in cuts in health costs for seniors to offset that lost revenue. Because choices have consequences.

But defining choices and consequences is a different task from discerning between the acceptable v. unacceptable or responsible v. irresponsible options among them. You could certainly agree on the options but not agree on the choice. In his "Win the Future" budget, President Obama identified three pillars, education, infrastructure, and energy, to guide decisions on spending and cutting. But yesterday, there was decidedly more focus on the "who" than the "what."

"Part of this American belief that we’re all connected also expresses itself in a conviction that each one of us deserves some basic measure of security and dignity. We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff may strike any one of us. “There but for the grace of God go I,” we say to ourselves."

I think this has the markers of an "opportunity" rather than "outcome" approach. When I was in school, my mom would make the investment in tutors when we needed it, but when report cards came out along with another honor roll bumper sticker, there were no $x for an "A" $y for a "B" that our friends got. What did we get? To quote my mother, "The satisfaction of a job well done."

There are broad applications for this approach as different policies and programs are assessed. One where we have been advocating change is in the area of saving and asset building. Currently, the bulk of spending to encourage these pursuits have been delivered through the tax code and accrue to households on the higher end of the income scale. That's not where it's needed. They're already on the honor roll. We need to target resources on those who need the help jump starting their savings. Families are more resilient to unexpected expenses or drops in their income when they have a cushion of support. They also provide the foundation to a more secure future. Both components support the vision of "a basic measure of security and dignity" that the President outlines. The Saver's Bonus in one way to provide the structures and incentives for saving to people for whom they will matter the most. There are many more. A lot will cost money, but we already spend hundreds of billions of dollars a year that benefit people for whom those resources are much less consequential. We'll be looking to see going forward if the President translates this vision into reality and makes the choices necessary to get there, especially as we approach consideration of the comprehensive tax reform that he has called for.