Tuesday, March 8, 2011

Don’t Fear the Budget

Austerity budgets are coming to the United States this year. The government funding situation is certain to be a mess however it comes out, with millions of jobs lost if fiscal propriety is fully restored to the federal and state budgets, the risk of state or national bankruptcy if fiscal problems are ignored. There will be millions of job losses in the most optimistic scenarios, potentially 25 million if an impasse shuts the federal government down for an extended period. The biggest job cuts will be the corporate workers laid off when businesses get skittish about the economy, either because of the weaker economy after government cutbacks, or because of uncertainty created by government gridlock.

As scary as this sounds to a lot of politicians and observers, the budget is so controversial precisely because most of the budget decisions this year are no-win propositions. Given the state of the economy, there is no right answer. That also means that the various alternative on the table, including shutdowns like the one the governor of Wisconsin is talking about, won’t be a calamity either. It isn’t going to topple the economy if budgets are off by a few billion dollars here or there, or if whole agencies and departments stop operating for a few months or a year. If there are large layoffs at some of the big corporations, it’s just a case of the old guard stepping aside to make way for the businesses that will make up the new economy.

I don’t want to dismiss the pain caused by the cuts in government services, but I don’t want to exaggerate those either. It’s easy to bemoan teacher layoffs and hospital closings, but we mustn’t pretend we’re pulling the plug on a fully functional educational system or a highly successful health care system. If half a million students are forced to get their high school education from books and the Internet, some won’t learn much — but many students remember next to nothing of what they learn in high school as it is. It is a similar story with other government services that we consider essential. The businesses that provide our essential infrastructure are not much better.

Against this highly conflicted economic backdrop, I defy anyone to say with confidence what’s really best when it comes to a government budget. Even a government shutdown might very well be the right course of action depending on the political situation. No one should fear the broad economic consequences of the austerity budget that may come out of Washington over the summer, or of the shutdown that may occur there if politicians cannot agree.

If there is anything to fear, it is the state of the economy. The drama in Washington and the state capitals merely speaks to the government’s inability to do much of anything about it. Perhaps the government hasn’t been trying very hard to fix the problems in the economy, and its measures so far, such as the Wall Street bailout, may have done more harm than good. But the federal government has been virtually broke since 2005. There isn’t much it can do to help the economy, no matter how hard it tries. Some people say the government should just shut down and let the economy fix itself, but the truth is, that wouldn’t accomplish anything either.

It’s asking too much at this point for a government budget to fix the economy. That’s not what’s at stake. When budget questions come up, we have to just take our best guess — then return our attention to the things that actually have the potential to fix something.