“DOOMSDAY” & “CATASTROPHE”
ECONOMICS:
CRAFTING POLICY FOR “CLIFF-HANGERS”
LARRY D. SANDERS
JANUARY 2013
TROUBLING TREND
• Periodic threats of economic crisis from government
shutdown increasing in frequency
• Artificial crises that may have real impacts
•
•
•
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Debt ceiling
Budget deficit
Budget passage
Sequestration
• Impacts may include
•
•
•
•
Reduced credit rating for Federal borrowing
Private business uncertainty
Government uncertainty/preventative cuts in spending/programs
Economic slowdown—domestic & global
SHIFTING PARADIGMS OF GOVERNANCE:
HOW DOES THIS AFFECT POLICY &
POLICY EDUCATION?
• Old paradigm:
• Congress & Admin assume compromise essential in a democracy.
• Congress Majority & Admin share primary role to govern.
• The minority accepts role of “loyal opposition.”
• New paradigm:
• Congress fractured among
• Some who consider compromise as desirable & some who do not.
• Some who see that primary role is to govern, and some who see primary
role is to reduce/eliminate government.
• The minority may play for destruction, not loyal opposition.
• Forces policy to be conducted by crisis mgmt; recurring threats of
“doomsday” & “catastrophe.”
NEW PARADIGM OF “NO COMPROMISE”,
“CRISIS MANAGEMENT”
• Old paradigm assumes
• Continuous policy options available, with compromise
allowing politicians/decision makers to arrive at policy
option grudgingly acceptable to majority & minority
• Negotiation process based on mix of reason & power
politics
• New paradigm suggests
• Policy options are discrete “either/or” choices
• Compromising party may have to do so w/o reciprocation
• Crisis may push choice in the direction of minority with no
compromise.
GOVERNMENT ABILITY TO DEFINE &
RESPOND TO DIFFICULT SITUATIONS
• “Functional”
• Relatively timely assessment & response that maintains
health/wellbeing of populace & functions of institutions
• Requires strong majority support that can effectively plan &
implement response with consensus
• Requires loyal opposition for long-term democratic health/ wellbeing to engage in negotiation & compromise
• Assumes that government can be instrument of “good”
• “Dysfunctional”
• Breakdown in common ground evaluation/response
• No consensus in definition of “healthy” solution
(economy/populace); Weak majority or split govt w/”govt is good”
battling “govt is bad.”
FINANCIAL CLIFF-HANGERS:
POLICY CHOICE AS GAME THEORY
(ASSUMES PROGRESSIVES HOLD SLIM MAJORITY)
Minority compromises as
“loyal opposition”
Minority refuses to
compromise; no loyalty to
govt.
Majority
compromises
Resolution with both
giving some; could
result in long term
resolution with
maximum gov’t
flexibility
No long term resolution;
short term limited
success; minority pays a
political price, but may
see limits on govt.
Majority
refuses
to
compromise
No long term resolution;
short term limited
success; majority pays a
political price, but may
preserve govt programs
No resolution; crisis
dictates loss of govt.
flexibility to manage
events
CHALLENGE FOR PUBLIC ISSUE
EDUCATION
• Resurrect a credible national forum for providing
public issues education.
• Redouble efforts to provide science-based
objective information.
• Frame the issue(s) objectively and based on the
reality of situation.
• Continue to present relevant options that provide
flexibility even when the political posturing is
promoting illusion of “no choice.”
• Do not accept patently false opinions; Recognition
by educator that just laying out options casts
educator as apologist/spokesperson for pro-govt
side.
CURRENT MACRO-ECONOMIC POLICY
SITUATION
• 2012 “fiscal cliff” successfully avoided
• Compromise found half of $1.2 trillion in deficit
reduction
• Pushed sequester of $600 mil. forward 2 months
• New 2013 “dual cliff”
• Debt ceiling —artificial Congressional requirement to
increase debt ceiling to allow gov’t to pay bills
• Sequestration to find remaining $600 mil
• Half defense spending; half other program spending;
Some programs are exempt (SS, Medicare,
Medicaid, SNAP, etc.)
FUNDING ISSUES BECOME MOOT
ONCE OBLIGATIONS INCURRED
• Mandatory vs. appropriated vs. authorized may
matter while legislation is being crafted.
• Once legislation passed & federal government
incurs obligation, it must be paid.
• Debt ceiling is about increasing what Federal
government can borrow to pay obligations, not
about whether obligations should be made.
DEBT CEILING CLIFF: PRECIPITATION OF
ARTIFICIAL CRISIS
MUST PAY?
PLANNING FOR FEDERAL CUTS…
• President Obama’s acting budget director… told agency heads
… to step up their efforts to prepare for $85 billion in automatic
spending cuts on March 1 by planning for furloughs, contract
delays, hiring freezes, buyouts and other cost reductions. …
• Zients… cited the across-the-board cuts of 8 to 10 percent that
would take effect at most domestic and civilian military
agencies if Congress and the White House cannot reach a
deficit-reduction deal…
• “If congressional Republicans refuse to pay America’s bills on
time, Social Security checks and veterans’ benefits will be
delayed,” Obama said. “We might not be able to pay our
troops, or honor our contracts with small-business owners. Food
inspectors, air traffic controllers, specialists who track down
loose nuclear material wouldn’t get their paychecks.”
• Washington Post, Jan 15, 2013
LATE JANUARY UPDATE:
CONGRESS ATTEMPTS TO “KICK
THE CAN DOWN THE ROAD” … AGAIN
• House GOP proposes to extend debt limit to Mid-May:
• “The House plans to vote Wednesday (23 Jan) on a measure that
would leave the $16.4 trillion debt limit intact but declare that it
“shall not apply” from the date the measure passes until mid-May”
(18 May).—Washington Post, 22 Jan 2013.
• Congress must make progress on budget, or
Congressional paychecks will be held up
• Does not address sequester 1 March, & subsequent govt.
shutdown 27 Mar if sequester not done
THE POLITICS OF
FARM PROGRAM
PAYMENTS
Presidential Election
Map 2012
(Blue: Dem; Red: Repub)
Farm Program Payments
By Congressional District
(the darker, the more
payments)
16
Presidential Election cartogram
popular vote by county, 2012
2012 PRESIDENTIAL ELECTION CARTOGRAM: 332-206
(EACH ELECTORAL VOTE REPRESENTS 1 SQUARE)
http://www-personal.umich.edu/~mejn/election/2012/
Cartogram: map re-scaled according
to population, rather than according
to geographic size.
Presidential election
results, by
% of votes within
county, 2012
17
THANKS!
• Contact:
• larry.sanders@okstate.edu
• Special thanks to:
• Jim Novak (Auburn)
• Jim Pease (Virg. Tech)