Now that we have gotten a few weeks of reprieve — knock, knock, knock — from the next politically manufactured financial crisis, it may be time to take stock and a deep breath. Part of that means trying to rationally and, perhaps, with a bit of introspection, think through what it means to put the nation on sounder financial footing.
Thousands of economists came together for their annual meetings in San Diego last week to discuss this issue among others. The four-day marathon sessions of academic papers and panel discussions included numerous topics relating to public finances.
Some of the most high-caliber panels, with titles such as “Sovereign Debt Crises and Policies: History and Future Prospects,” “What Do Economists Think about Major Public Policy Issues?” “Models or Muddles: How the Press Covers Economics and the Economy” and more, have been posted for free public viewing (at: http://bit.ly/11gKuBT).
Anybody interested in getting an unadulterated or, better, unfiltered (through the press) view about what a majority of economists think about important policy issues, should feel inclined to watch a few of those sessions.
Of course, not everything you will hear is going to make you feel better about the economy, about economists and even concerning yourself.
It is easy to harrumph about needed cuts in spending or necessary increases in taxes. However, the proof of the pudding is what we are willing to sacrifice ourselves. That is where the “not feeling so good about oneself” comes into play.
The economy is still ailing and most readers of this column will do what I am inclined to do: look toward others to bear the burden(s).
Raising taxes on the very rich, cutting spending on subsidies and programs that don’t support us or people we hold dear — those are understandable solutions to promote. Especially when one considers that only a few among us have experienced any salary increases over the last few years. To the contrary, we had to deal with layoffs or short-time work or furloughs.
Yet, there is one topic on the issue of national financial health that an overwhelming majority of economists seem to agree could make a real difference, but which almost never gets any political traction: the limiting of so-called tax expenditures.
In plain English, those are the revenues the government does not collect because of tax-breaks.
Estimates for fiscal year 2013 (Joint Committee on Taxation, U.S. Congress at: http://1.usa.gov/TcJ3iR) listed the following cost of popular tax-breaks ($billion): Employer-provided health insurance ($147.8), pension contributions & earnings ($147.0), reduced tax rates on capital gains & dividends ($110.4), mortgage interest deduction ($89.6), charitable giving ($46.9), child tax credit ($25.7) and so on.
Looking at that list clarifies why compromise is so difficult. Almost anyone can find an item that would hit one’s own wallet (hard) if that particular tax-break were removed. Of course, one could and should think about phase-outs rather than outright rescission. However, the bitter truth is that all of us will have to pay if we want to get our financial house in order.
This realization is what is needed to drive political compromise — plus sustained support for those politicians who tell their electorate straightforwardly about the tough choices ahead.
That could lead to some real reprieve from constant crisis mode.
Dr. Michael Reksulak teaches economics and public finance in Georgia Southern University’s College of Business Administration. He may be reached by email at mreksula@georgiasouthern.edu.