The Wrongologist

What’s
Wrong Today:

“Don’t tax you. Don’t tax me. Tax that
fellow behind the tree.” –Louisiana Senator Russell Long.

 From
Barry Ritholtz’s Big Picture Blog:

Is this the
way to run our country?

Ritholtz
suggests an alternative approach is to apply game theory to resolve spending
and tax issues. Game theory studies strategic decision making, how conflict
and cooperation between decision-makers leads to certain outcomes.

Game
theory might help us with these issues. How?
By stopping the taxing and spending cuts of that fellow behind the tree and instead, forcing
people to raise their own taxes and cut their own spending.

How would
this work? We would have to change the budget process: The president would
establish  spending and taxation goals
and the House, which is responsible for passing the budget would set up 50 state working groups to decide
how the federal revenues, benefits and expenses that flow to their own state would be spent/cut.

The state
working groups would determine their state’s priorities. If they want to do
polls or surveys, to get input, fine. They would get no budget for doing this;
it comes out of their own congressional staff budgets.

Now, it
becomes difficult to aim at the guy behind the tree. Each state delegation would
determine their residents’ fate. And they would get the reward, or pay the
price at the ballot box every other November.

Let the
CBO determine how much money should flow to each state from the Federal
Government. This would include Social Security and Medicare, spending on
Education, and other financing, like FEMA.

We would
quickly discover which priorities the people in each state have for government
spending, and also the priorities of their elected representatives: Don’t like
military spending? Cut it in your own state. Against Social Security? Cut aid
to the elders in your own state. Have a problem with FEMA? Opt out of it.

This would
force legislators to make real sacrifices, not like today where they cut things
that impact other groups or people. It eliminates the hypocrisy of the deficit
peacocks that vote for budget busters and then disingenuously present
themselves as concerned about our debt.

For example, five
states comprise the Tea Party Homeland. They are: Alabama,
Georgia, Louisiana, Mississippi and Texas. Each receives more from the federal
government than it pays to it in taxes and other revenues. All of these states
voted for Mitt Romney by big margins and contribute a healthy share of the Tea
Party members now in Congress.

The Tea Party is working hard to cut
federal spending.
 And they are following the Sen. Long
mantra: Government workers, social safety net programs, defense workers,
schools, environmental programs, Big Bird, all will feel the lash of the Tea
Party’s intransigence. 

The ongoing
polarization surrounding the Sequester, the debt limit and the deficit is not your
normal political drama that gets resolved at the last minute. 

It represents the
apogee of Tea Party anger and cynicism. 

The
biggest problem we have in our political process is that Congress critters have no individual accountability: There
are no effective checks on their votes or on Congress’ decision making. We
learn in school that the democratic process works, that we can vote out a
politician that doesn’t represent us in the manner we need. That’s only true in
theory. Incumbents rule in Congress. And while the national average is about one
congressperson per 800,000 voters, many in largely rural states have outsized power.

Congress is a protected class under the
Constitution.
They decide their own compensation and behavior. When they saw that presidents
could pose a threat to their rule, they modified the Constitution to include
term limits — but only on the president. And the Constitution specifies rather
clearly that the power to tax and spend lies solely with the Congress.

All the
noise about what Mr. Obama or any president can do is simply that: Noise. Congress
holds all the cards.

The risk with using game theory to drive individual state deficit cutting is that, given the federal structure of the Constitution, an
appropriations law that results in lower per capita federal appropriations for
health care for the elderly in State A might be vulnerable to attack on constitutional
grounds, regardless of an endorsement by their local congressmen.

Another concern
is the problem of funding the commons: Watersheds cross state lines, air
pollution respects no boundaries. Much of federal spending is not state
specific: Consider defense, infrastructure, foreign affairs, or regulation of
financial markets.

Finally, game theory works when the participants are rational.
Unfortunately our political system (the Tea Party in particular) has descended
into a black hole of weirdness.

But, let’s
see if 50 state level deficit cutting workshops can help solve the great
political problem of our time.

Nothing
else is working.