Governor Paterson has been insisting on fiscal responsibility. That means cutting the budget by many billions. Many other governors and legislatures are trying to do the same.
Fiscal responsibility to most people means living within your means. And states are trying.
But there’s a problem. More than two centuries ago, Immanuel Kant differentiated actions which satisfy the categorical imperative, actions everyone can properly take, from those which are proper only if few people act that way. Some things we do are fine unless everyone tries to do them. Then we face disaster. Withdrawing our money or making investments in real estate are perfectly reasonable behaviors for individuals. But when too many people do it at the same time we get runs on banks, financial bubbles and economic crashes. That adds up to disaster. For the same reason, we can’t all cut back together.
That’s exactly the precipice we’re standing on. When nations and states cut their budgets together, the effects are cataclysmic. Hoping to live within our means, we get great depressions that beggar us all, including state and national governments.
As Keynes explained, budget cutting doesn’t suddenly make it possible to pay debts because when most budgets are cut at the same time, everyone loses. Resources virtually disappear. Instead problems become so intractable that many people end up “solving” their problems by jumping out the window.
So that’s the first thing wrong. We must not all cut together. That’s self-destructive – everything shrinks, taxes dry up, everyone is poorer and the governments still can’t pay their debts.
The other thing wrong is that we are allowing money to idle. We’ve made substantial tax cuts for the wealthy but they’ve just lent us back the money. That doesn’t improve investment. It increases state expenses because now the public burden is BOTH the lost revenue PLUS the interest we pay. And nobody invests.
Frankly, the wealthy have gotten too many breaks in the last few years and it’s pay back time. The American workers who roll up their sleeves are constantly told to sacrifice for the good of the company but not share in the wealth. It’s been government of, by and for the big companies and their top management.
Meanwhile those same folks are capitalizing on people’s frustrations, using that frustration to justify still more abuse of the people’s trust by the same people that have brought you huge bonuses, economic crisis, Enron and the rest of the scams that have sold America short. They’re using that frustration to prevent the rest of us from doing anything about their misbehavior, and using that frustration to increase the personal gains of the wealthiest at the cost of making the problem worse for everybody else.
— This commentary was broadcast on WAMC Northeast Report on December 14, 2010.