Broccoli Time

In his column this morning David Brooks presents a prescription for America’s future: Americans will just have to eat their broccoli. His is a four-step plan:

First, they have to persuade a country to postpone gratification for the sake of rebuilding the country. This country hasn’t accepted sacrifice in 50 years.

Second, political leaders will have to raise taxes and cut spending to get the federal fiscal house in order, and they will have to do it at a time when voters are already scaling back their lifestyles.

Third, they will have to refrain from doing anything that might further damage America’s fiscal position, which is extremely fragile. That means not passing a health care reform package unless it is really and truly paid for. That means forming a Social Security commission next year to tackle that entitlement problem.

Fourth, the political class is going to attempt the politically unthinkable. The U.S. is going to have to move toward a consumption tax, to discourage spending and encourage savings. There’s also a crying need for tax reform. As economist Douglas Holtz-Eakin points out, the tax code is rife with provisions that encourage leverage and discourage investment. The government will have to spend less on transfer payments and more on investments in science and infrastructure.

There doesn’t seem to be anything about surrendering ourselves to a higher power or making amends in this program. Unless the federal government is the higher power.

I also note that there’s not a smidgeon in Mr. Brooks’s advice about what he refers to as “the political class” sharing the pain. Additionally, Brooks makes a common error: he assumes that the only government is the federal government and that the federal government can act without affecting other governments.

This is far from true. If you look at 2007, before the ghastly and, hopefully, temporary ballooning of federal expenditures, the federal budget was just under $3 trillion. For that same year state governments had an aggregate budget of nearly $2 trillion (Excel spreadsheet). Add local governments to the mix and you recognize that the federal government accounts for just about half of government at all levels considered from an expenditure point of view. And that doesn’t take into account the billions or even trillions in underfunded or unfunded state and local employee pension programs.

Unlike the federal government state and local governments don’t buy B-1 bombers nor are they so much driven by transfer payments as is the federal government. Most state and local budgets are primarily wages. State and local governments depend on three things for most of their revenues: income taxes, real estate taxes, and sales taxes. Revenues from all three streams (income, property values, and retail sales) are falling. If the federal government imposes a consumption tax, it will further depress revenues from sales tax and state governments will be placed in even more serious straits than they are in now.

To have a truly workable set of “musts” government at all levels must adjust government employee compensation plans to suit the new reality.

I don’t see any appetite whatever for doing any of the things that we “must do”. Do you? Can you imagine the elected officials we currently have in office doing any of these things? I can’t. Remember that the reelection rate for incumbents tops 90%. Can you imagine electing officials who promise to make us eat our broccoli?

We will not eat our broccoli! We will hold our breaths until we turn blue!