Let's begin with a multiple choice test. The United States of America is:
a) a for-profit corporation;
b) a family, like the typical American family in a 1960's sitcom;
c) a nation -- with a national economy and nation-sized problems.
If you answered "c," there's good news and bad news. The good news is that you answered the question correctly. The bad news is that you probably have no future as a pundit, where recycling bad metaphors is an essential job skill. (On second thought, that's probably good news too. You undoubtedly have better things to do with your time.)
Two metaphors keep reappearing in our national debate like comets on a too-tight orbit. One says that the government's finances are like a family budget, and the other says that the country needs to be run more "like a corporation." Both are routinely used as "nonpartisan" illustrations of the need to cut spending.
If I had a nickel for every time I've heard these misleading analogies, I'd have enough money to buy Alan Simpson a cow.
Dysfunctional Family Values
Conservative economist John Cogan puts it this way: " ... (I)magine that a mother sends her family to the store, tells her husband to buy beer, her teenage daughter to buy magazines, and her ten-year old son to buy candy. Imagine, moreover, that she sets no limits on how much each can spend. Each family member would then overspend ..."
Leaving aside our hypothetical family's more immediate needs (starting with a stint in rehab for Dad), the analogy doesn't work. Government spending doesn't take place in a "store." It takes place within a national economy, which is like a machine with many moving parts. Part of the government's job is to spend in a smart way that keeps the machine moving and functioning smoothly.
A comment from the Atlantic's Megan McArdle should be read in that context, too. McArdle writes: "We need politicians who think about these things the way a financially sound family thinks about their budget." Actually, we don't. We need politicians who think about a budget the way a financially sound nation thinks about a budget. If the government cuts spending in one area it affects the entire economy, and could wind up costing more than it saves.
If we spent $400 or $500 billion in the next two years on rebuilding our infrastructure, it wouldn't be "lost" money the way that the cost of a new 70-inch television would be "lost" to an American household. This money would be used to hire people and purchase raw materials. The people who were hired would no longer need financial assistance like unemployment, food stamps, or poverty assistance. And they would use their income to buy things, which would increase employment even more by creating jobs for people who provide the things they would buy... including televisions.
All of these newly-employed people would pay taxes, creating more government revenue. And as the economy grew it would develop its own momentum, eventually reaching a point where the extra spending wasn't needed and further cuts could be considered. The "family" analogy doesn't work at all.
Unfortunately, Democrats are sometimes all too eager to embrace their opponents' bad metaphors. From the president's State of the Union address: "Just like any family, we have to live within our means to make room for things we absolutely need." From White House Budget Director Jacob Lew: "(T)ackling our challenges in the long term ... starts with doing what families and businesses have been doing during this downturn: tightening our belts."
What a lousy analogy. This country doesn't have a deficit problem because Mom let it loose in some store and now Dad's getting drunk while Junior gorges himself on eskimo pies. It has a deficit problem because bankers broke the economy and we're living in the wreckage. It has a deficit problem because we've been giving the rich a free ride through tax cuts of unprecedented generosity. A couple of wars are playing their part, too.
People use the "family budget" analogy because we're supposed to respect the image of a thrifty, self-disciplined homestead. But consider this household: One son's a hedge fund manager who's taken most of the family income for himself and isn't even paying rent on his room. The other kids are struggling to pay the bills because the rich one's not pulling his weight. Hedge Fund Boy's living like a king, but money's so tight for everyone else that Mom and Dad have decided to feed Grandma less and turn her heater off for the winter. And Grandma built the house!
But when anybody suggests they're not treating Grandma right, they sneer and say "What do you want us to do? Buy her some food and put it on a credit card?"
The Business of America Is America
The latest entrant in the America-As-Corporation sweepstakes in Mary Meeker, an investment analyst and managing director with Silicon Valley investment group Kleiner Perkins Caufield & Byers. Meeker has weighed in with a 466-page PowerPoint presentation called "USA Inc.." "USA Inc." stumbles from the start because the metaphor, while already a cliché, is so off-base. Corporations have investors, unelected executives, and customers. Their responsibility is to turn a profit, and their activities must be directed toward that goal. The government is an expression of the national consensus, a work of community and ideals.
What's more, the American corporate model has just failed spectacularly... twice. The first failure was the Wall Street collapse, which forced America's biggest banks (including Ms. Meeker's former employer, Morgan Stanley) to be rescued by the taxpayer. The second was the BP oil spill, which proved that corporate risk management can't be trusted to protect the public. With this track record, is the American corporation really a model worth emulating?
From a business perspective, any consultant who shows up with 466 pages or slides has already failed. The consultant's job is to synthesize, analyze, and explain. A well-structured analysis of any scope can be presented with much less verbiage and raw data. There's far too much in these 466 pages to address it all, but here are a few samplers:
"USA Inc's financials are discouraging," says Meeker. Really? As L. Randall Wray points out, the US government has been in debt every single year since 1776. That's one of the ways a government operates. The question is, how much debt is appropriate?
Meeker combines health expenditures with Social Security under the "entitlement spending" heading, mimicking a right-wing messaging tactic that uses legitimate concerns about Medicare and Medicaid as a cover for cutting retirement benefits. And this question shows how deeply out of her depth she is when it comes to economics and social programs: "What level of entitlement spending can we afford without suppressing job creation?"
While right-wingers love to argue that government spending suppresses job creation, it's hard to make that argument when government spending is used to hire people (an option not raised in Meeker's report). As for so-called "entitlement" spending, studies show that this money is recirculated into the economy. That should lead to jobs and growth (as opposed to tax cuts for the wealthy or other benefits, which lead to savings or offshore investment and fail to produce employment).
Meeker's even more off-base on taxes. Her "corporation" has cut the "price" for the customers who have consumed more of its "product" -- national wealth - yet here's a typical tax-related question: "How crucial is the role played by lower relative tax rates -- especially for corporations -- in stimulating job and GDP growth ...?" "USA Inc." serves American corporations like a wholesale supplier, providing them with an educated workforce, a national defense, clean water to drink, and countless other services. USA Inc. needs revenue. Yet Meeker's only question seems to be, should we charge these big customers even less?
As Felix Salmon points out, Meeker ducks a lot of issues. And she asks a lot of questions like this one: "Imagine you're a shareholder in USA Inc. How would you feel about your investment?"
Oy.
This embarrassing performance reflects poorly on those involved, including her advisors -- a group that includes John Cogan (he of the drunk dad with a fat son metaphor), Meg Whitman, and Peter Orzsag (Jacob Lew's predecessor at the White House.) Meeker made her name by pumping up the Internet bubble in the 1990's, and she came under heavy criticism for it. Now we're in a Bad Metaphor For Government Spending Bubble, and it looks like she'll be riding that one too.
Here's the bipartisan agreement I'd like to see: A moratorium on lazy analogies for the national budget. If we can't set aside our partisan differences long enough to agree on that, how will we ever agree on anything else?
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project and the Strengthen Social Security campaign. Richard also blogs at A Night Light.
He can be reached at "rjeskow@ourfuture.org."
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
Because the money that the government (all levels) spends on public works projects goes directly to the people who unskilled and unemployed. Because that is who is hired to complete the projects, right?
This argument makes absolutely no sense. The government cannot spend money in an effort to get tax revenue. That is literally wasting money. The net revenue would be far less than the initial investment.
Construction projects dealing with infrastructure are not done to create jobs. that is not an efficient way to go about it. They are done to create or repair necessary public properties used by people.
Second, and more importantly, the jobs that supposedly cost between $250k-$450k were nothing of the sort and you know it.
As we continue to run up massive spending debt, one day this debt will come crashing down upon us. Call it physics... call it economics... call it anything you want, but don't write it off as a non-problem.
But the fact of the matter is that debt is not always bad. That's true for a business, that's true for a family and that's ESPECIALLY true for a government!
Hmm. Do I address you as Left.. or as Right? :-) Think I'll go with "LR."
I agree with what you said, to determine whether something is good (or bad), it needs to be placed into context.
I'm concerned about debt in the context that: (1) We owe ourselves $14T dollars and do not appear to have the will to pay it back. This means a devalued currency. (2) We have rising entitlement costs amid political pressure to cut taxes. (3) We have two on-going wars, previously funded off-book, and (4) we really, really need to fix our infrastructure. (5) The Dems and Repubs are at war with each other and not working to solve the country's problems.
Lastly, and most importantly, someone replaced many of our elected leaders with children or immature adults who are apparently incapable of dealing with the debt problem or even addressing it forthrightly with the American people. Instead, we get bumper sticker sound bites about freedom, liberty, Socialism, Government take-overs, and so-on. It's not that the problem of debt is unsolvable, it's that there do not appear to be any adults in the government room.
And in this context, the debt scares the bejezus out of me.
Mike_Westlake
www.TheWestlakeReport.com
What happened to Greece?
Should the government be run more efficiently and cost-effectively? Yes.
Is the government paying for things that it probably shouldn't? Yes.
Are there people and companies that use and benefit from the services the government supplies, yet shirk their responsibilities to pay their fair share? Yes.
And to take that government spending out of direct spending and hand it over to a corporation when the corporations have shown again and again that they have no idea what they're doing????? That's WORSE than insane!
Bravado aside, we are a nation of immense wealth but suspect moral character based on the treatment of the "have-nots". Is the almighty dollar the bottom line or the overall health of our nation, based on all of its citizens.
So when times are tough and wages are down, do you
A: Pull junior out of college, skip oil changes, refuse to replace your inefficient 30 year old water heater, and ignore that leak in your roof
or
B: Accept your boss's offer to go back to full time work, after having cut your hours steadily over the last three decades.
We ain't "broke". We are lazy and greedy.
"the Wall Street collapse, which forced America's biggest banks (including Ms. Meeker's former employer, Morgan Stanley) to be rescued by the taxpayer" No, politicians bailed out these firms for campaign cash. America was not forced to bail them out.
"the BP oil spill, which proved that corporate risk management can't be trusted to protect the public."
No, the MMS was in charge to ensure that there wasn't a spill and to protect the public. Government, who gave them a safety award before the spill, can't be trusted to protect the public.
And all of Eskow's points about the cause of debt are irrelevant regarding as he doesn't address how to pay for it.
"If the government cuts spending in one area it affects the entire economy, and could wind up costing more than it saves." Government spending, when done via taxes, reduces what citizens would spend on themselves. And government spending (if not on protecting our liberties) usually favors one group at the expense of citizens and taxpayers; thus, is inefficient and immoral.
Actually we should stick to three simple facts that Michael Moore outlined yesterday in Madison Wisconsin. The Richest 400 people in this country have more than the poorest 1.5 million! In this country it's still one person one vote. There are way more of us than of them---
One thing though the rich own the media --including Huffington Post--you won't see any prominent play for Moore's speech or the protest in Madison---and that "fair and balanced" channel will continue to pull coverage with PALM TREES to try to convince you that the protests are becoming violent. They LIE> why is it "against policy" on this site to point that out?
Are these numbers correct? I would find the statement more believable, and it would have a much bigger impact, if it said that the richest 400 would have more than the poorest 150 million.