Mar 03, 2013 | 723 views | 0 0 comments | 7 7 recommendations | email to a friend | print


by March 1, 2013

I spent too much time and effort this week trying to figure out the budget implications of sequestration. This made me wonder how many, well, normal people would be willing to do that. If the answer is “not many,” then in what sense can we talk about the “informed voter”? And if the “informed voter” is a chimera, how can we expect democracy to yield desirable outcomes?

Let’s start at the beginning. Anyone who relies on the news media to learn the implications of sequestration is probably confused and most likely misinformed. With few exceptions, the media lead us to believe that today’s automatic “cuts,” mostly in federal “discretionary” spending (that is, spending on things other than Social Security, Medicare, and Medicaid, which Congress has on autopilot), will be catastrophic for the economy. Why? Because, like good Keynesians, they believe that the economy now suffers from inadequate consumer demand, and that lowering government spending would decrease demand even more. For example, if government workers lose their jobs, they can’t buy things, and if military contracts are cancelled, the contractors’ employees will have less income to spend. This would lead to more layoffs. Government itself is a big consumer of goods and services, so less spending means less consumption, with a rippling effect throughout the economy.

Hence, sequestration is said to threaten a new recession when we really aren’t out of the last one. (Never mind that consumer spending has recovered from the recession, and that the money which government leaves in the private economy will be spent or invested, which constitutes someone else’s spending.)

If you can find a commentator who is skeptical about this bleak prediction, chances are he or she believes that the Pentagon side of sequestration will, as former Secretary of War Defense Leon Panetta put it, “hollow out” the military. (Untrue, though the military could use some hollowing out. See this graphic.) Among conservatives, we find a large number of military Keynesians, who believe that Pentagon spending is a twofer: it protects the country while buoying the economy by creating jobs making war materiel. Even some self-styled progressives claim this. Democratic Rep. James Clyburn of South Carolina, who probably thinks of himself as a dove, protests Pentagon spending reductions because they would eliminate contractor jobs in his congressional district. (His political self-interest is too obvious to require comment.) And the New York Times refers to the “deep automatic spending cuts that will strike hard at the military.” Again, not true. At any rate, U.S. foreign and military policy endangers Americans, and people making war materiel could be making consumer goods that improve our lives.

While most commentators and reporters talk about “draconian” budget cuts, occasionally someone points out that these are not true cuts, but only reductions in the rate of increase. Washington uses baseline budgeting, which builds in spending increases for future years. In Washington bureaucratese, reducing a projected increase is a “cut.”

So, what is the truth? After some time-consuming, eye-straining, and head-aching concentration, with help from Cato Institute budget analyst Tad DeHaven, I learned that with sequestration, total federal outlays in FY13 would still be $15 billion higher than FY12. Higher, not lower. But, admittedly, that’s misleading, because the sequester applies mostly to discretionary spending. According to recent figures from the Congressional Budget Office, which assumed that the sequestration cuts would go through, discretionary spending actually would be $72 billion lower than last year. Mandatory spending, however, would increase by $85 billion over last year. Include interest on the federal debt and you arrive at the overall $15 billion increase in federal spending. (To download the CBO’s spreadsheet, click here.)

But that’s not the end of the story.

When the media and politicians refer to $85 billion in cuts, they are referring to funding (“budget authority”) not actual spending (“outlays”), an important difference. DeHaven writes, “According to the Congressional Budget Office, the $85 billion in sequestration spending cuts translates into [a] $44 billion reduction in actual federal outlays for 2013.” Of that, $35 billion comes out of discretionary spending — just 2.7 percent off last year’s level. (The rest comes out of mandatory spending, mostly Medicare. Thischart, compliments of DeHaven, puts things in perspective, as does this one and this one.) Establishment economist Jeffrey Sachs acknowledges that with sequestration, this year’s discretionary spending would be a larger percentage of GDP than President Obama projected in 2009. This is draconian?

If a 2.7 percent cut in discretionary spending endangers our economy and security, something is wrong. As I’ve said before, progressives scoff at the claim that our society is too dependent on government, yet they issue dire warnings about a less than 3 percent cut in discretionary spending after a decade during which the federal budget doubled and the debt skyrocketed. They can’t have it both ways. Are we really to believe that government agencies can’t cut 2.7 percent from their budgets? (Of course, the agencies should be abolished.)

Are your eyes glazed over by now? That goes to my deeper point. I had to exert some effort (with much help) to learn the facts. If you were to casually search the web for the information, you would likely come up with inaccurate information. For example, Wikipedia says expenditures of nearly $3.8 trillion were enacted in FY12. But the latest CBO spreadsheet says $3.5 trillion. Why the difference? Wikipedia is not up to date. Different government agencies issue different estimates of spending at different times during the budget year. You have to make sure you’re using the latest numbers.

I subjected myself to this pain because I’m a professional masochist. I’m paid to do it. How many people who are not so rewarded are likely to search for, locate, and download CBO spreadsheets to see the numbers for themselves? Very few, I’ll bet. And who can blame those who won’t? They have families, friends, communities, and jobs to attend to — matters they actually affect through their actions. But if most people don’t have time or incentive to learn the facts about this one issue (never mind all the others) — and if the news media can’t be counted on to tell the plain story — how can Americans fill the role of “informed voters” that democracy in theory requires?

Next year there will be congressional elections. If a voter doesn’t know the facts about the budget, she won’t be able to judge the sequestration issue. And if she can’t do that, how can she intelligently decide which congressional candidate to vote for?

Most people would say that voting for Congress is important, so why don’t they spend time doing this necessary research? Because they know that the effort would have no real payoff. Time is scarce, and there are always other uses of one’s time that really will make a difference. The average congressional district has 600,000 residents, three-quarters of whom are of voting age. No single vote will determine who gets elected or what policies are enacted — that is, no matter what you do, the outcome will be the same. And should your favorite candidate win and enact his program, you would pay only a tiny fraction of the total cost of that candidate’s policies; most of the cost would fall on others. So why exert much effort?

Thus, it’s costless to vote for the candidate who makes you feel good about yourself. As Bryan Caplan has shown, given these incentives, people tend to vote according to their biases, which for most people embody economic fallacies.

Yet the keepers of the system (pundits included) play a game in which they pretend that voters are informed and make wise decisions.

Common rhapsodizing about democracy notwithstanding, the details of what Leviathan does are beyond comprehension. (Remember, members of Congress don’t read the bills.) Even an enthusiast for big government can’t tell if this government’s policies do good or harm. Yet the cult of democracy aims at maximum participation in elections. If a small number of ignorant voters is not good, how can a larger number be an improvement?

Here’s a better idea: let people cooperate with one another in the free market, and leave as few matters as possible to the overrated democratic arena.

This post was written by:

Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's FamiliesYour Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington PostWall Street Journal,American ScholarChicago TribuneUSA TodayWashington TimesThe American Conservative,InsightCato Policy ReportJournal of Economic DevelopmentThe FreemanThe World & IReason,Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.

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