Tuesday, September 06, 2011

A Conflict of Visions - UPDATED

One of the most compelling books by Thomas Sowell was one called a Conflict of Visions.  In it the economist argued that liberals and conservatives use the same words but do not mean the same things when they use them.   Liberals describe justice or equality in syntactic notions that are substantially different from the same words when they are used by conservatives.

My sister in law, who is a frequent poster to Facebook - began a thread a couple of days ago asking why the private sector had not picked up the slack created by drops in jobs in the public sector.   As the thread evolved I got into a discussion with a friend of my sister in law's named Jacob.   We eventually got into a discussion about whether (as the National Priorities Project - which is a pretty left of center advocacy group) the cost of military expenditures (past, present and future) amounted to 60% of the budget - NPP has a chart which purports to show that.   Jacob argues passionately that the NPP figures are correct.  And indeed, in one sense the NPP  could be accurate.   But like many public policy arguments today - the statistical accuracy is not helpful to understanding the budget challenge we face.

To be fair, Jacob claimed that he is not an Obama supporter and that he is concerned about many of the same things that I am concerned about in our current discussions - namely I think both of us are concerned about the re-evolution of mercantilist schemes which allows interests to lobby to get advantages they have not been able to secure in the marketplace.  Jacob rightly argues (and I agree) that this is not a problem with just the current administration and goes back to (at least) the Bush administration (we both might argue well before W).

What interested me as I thought about his comments was the way we are looking at the same issue.   The chart at the left is how I look at the issue of government spending.  I am (and have been for several years) concerned that government is taking an increasing share of the fisc.  That has the potential to crowd out private sector spending - a partial response to the original post made by my sister in law.   For at least a decade we took in about 18-20% of GDP and spent a couple of points more - then (beginning at the end of Bush but clearly during Obama's tenure) we escalated the percentage of GDP dedicated to the federal government and concurrently did not increase taxes (which I believe would have devastated the economy).   All that spending (which the chart clearly shows went to two areas - interest expense and funding entitlements.   If you look at the chart the worry comes not from "all other spending" but from things like Medicare.  The NPP analysis would lay the problem on military (past, present and future) spending - but as the chart suggests - the cause is something different.   I can see the other side - but from my view the problem comes not from military spending but from other sources.   Until we begin to acknowledge that entitlements are the problem we need to solve, the long term trend for budget deficits will not be reversed.    I am not sure what the right percentage of GDP should be dedicated to the military and I am even willing to concede that some of our military spending in the last decade was almost mercantilist like.  But I still worry about those entitlements and think that is a bigger problem.

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