THE BLOG
12/06/2010 01:17 pm ET | Updated May 25, 2011

Why Can't We Get Along?

Can we finally put to rest the absurd notion that one political party is more enamored with spending than the other? Both Democrats and Republicans relish the opportunity to spend taxpayer dollars with little or no regard to the consequences of overspending: namely, deficits and debt.

The differences, however, lie in the nature of the spending. As a general rule, Democrats prefer to spend on social programs and prefer to forego revenue to the national coffers through tax breaks and incentives for the poor and working class. Republicans, more increasingly as a block and with near unanimity prefer to spend on defense and prefer to forego revenue to the national coffers through tax breaks and incentives to the well-to-do.
A review of spending and revenue imbalances over the past half century shows that Democrats are far more likely to be sensitive to and effective in closing the gap between income and outgo than Republicans. In the 1990's Clinton actually proposed and effectuated budget surpluses.

Both parties have shown an insatiable appetite and thirst for increasing entitlement spending. The exponential growth in health care costs has been with us for at least the last four decades and although Democrats have attempted on numerous occasions to contain costs through public sector constraints, Republicans are far more likely to support private sector solutions.
Democrats and Republicans since the 1970's have experimented with deregulation, from the airlines to financial services, but as a general proposition Democrats are more amenable to correcting deregulatory failures through government regulation while Republicans once again prefer to rely on voluntary regulation and the private market.

The Nixon and Carter Administrations were particularly keen on environmental stewardship but since 1980 environmental regulations have been on a roller coaster and as a general principle I think it is fair to say that during Democratic Administrations you see efforts to enhance environmental regulation and during Republican Administrations voluntary compliance is championed.

On economic issues Republicans believe in trickle-down theory, namely that a rising tide will lift all boats. The supply-side theory trumpeted in the 1980's was a fiscal and financial disaster and debt and deficits exploded. Tax increases in the early 1990's on high income earners helped tame the deficits and along with a strong economy and reforms in welfare spending programs and restraint in discretionary spending produced budgetary balance and surpluses.

But if past is prologue, divided government produces compromises that ultimately give wins to both sides, hence the only thing that is a sure certainty is the fact that spending will prevail and debt will increase. If the currently evolving compromise is to extend unemployment compensation for extension of tax breaks for the wealthy, both cost money and will increase debt.

Now, of course, deficits and debt have a role to play in the economic cycle of booms and busts. There is good debt, for instance when you invest and get a healthy return on investment, and there is bad debt, when you spend on things that reap no return on investment. Incurring debt when you have the ability and resolve to pay it off is wise. Incurring debt when there is little prospect of paying it off is bad debt.

Unemployment compensation at a time when we have persistently high joblessness is a wise investment in that it helps the economy by putting money into the hands of folks who otherwise would not be able to spend. Increasing debt by giving tax breaks to folks who do not need them and will not reinvest the dollars back into the economy makes little economic sense, but it is a reflection of an almost religious adherence to trickle-down economic theory that bears little or no relation to reality.

What is so frustrating about the current state of debate on these issues, however, is the rank hypocrisy of those who righteously claim that they do and you must follow the wishes of the American people. Politicians today more resemble weather vanes than pillars of strength. I have consistently argued over the years that our elected officials must be leaders and not followers and hence with the information and intelligence available to them must make decisions that most folks have neither the time nor the inclination to study.

But this is one instance in which I wish the politicians would in fact follow the wishes of the people, because the basic instincts on whether it makes sense to give tax breaks to wealthy people when so many people are suffering reflects negatively on the position unanimously taken by the Republicans on Capitol Hill.

And while I sincerely believe that incurring debt to help us out of the current fiscal hole we are in is both economically and morally prudent, now is not the time to focus on the structural imbalances that both parties have helped in digging. Rather, we need to follow through and keep to the promise of addressing these imbalances when we can afford to: namely, when the economy recovers.

The current situation calls for audacity not austerity, conviction not cowardice, principled compromise not political expediency, compassion not condemnation, calculation not callousness, but most of all responsible governance not campaign rhetoric. Is this possible? Most will say probably not. In the end the one true certainty such failure will bring about is the fact that we, the increasingly shrinking middle class, will pay the price for such failure.
And the widening income inequality, the ever-increasing gap between the super-rich and the rest of society portends serious societal consequences down the road; you know the one where the can is.