Phil-osophically Speaking – December 10, 2010

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Compromise: Democracy’s Golden RuleCom-pro-mise — a beautiful three syllable word upon which the nation was founded and perpetuated over the expanse of a continent and a span of several centuries. Americans love to think of themselves as individualists, independent, unwavering in their beliefs and principles. But the truth is very different. The genius of America, the reason for its survival, is its unique acumen for compromise.

As politics become more polarized, accommodation becomes more elusive. Yet, the issues that divide Americans are no less divisive than in the past. Since unanimity of opinion is not to be had in this world, democracy depends on compromise. Indeed, our inability to compromise will compromise us. A turn of phrase that Theodore Sorensen, John F. Kennedy’s chief speechwriter, might have employed. But however you wish to say it, compromise is integral to the health of our Republic.

The United States faces many threats, but perhaps none more invisible and insidious than from within. It was internal maladies, not foreign threats that unraveled the Roman Empire. Nothing so imminent faces the United States but things on the domestic front are challenging the welfare of the nation. This past November, the unemployment rate rose from 9.6 percent to 9.8 percent. Robert Reich, President Clinton’s former Labor Secretary, lamented that “this is not a recovery but a continuing job emergency. We are headed in the wrong direction,” Reich continued by morosely acknowledging that “the private economy created only 160,000 jobs. At this rate unemployment levels won’t return to their pre-recession level for more than a decade, if ever,” Reich warned. He urged action.

I cannot agree more but action means compromise. President Obama’s deficit commission, chaired by Alan Simpson and Erskine Bowles, erstwhile though maverick representatives from the Republican and Democratic Parties respectively, have surprisingly come up with some creditable ideas that will require some give and take, the very soul of compromise, if they are to be made part of a bipartisan agenda. One thing both sides need to remember is that compromise does not mean surrender. While it means that each side needs to give something up, it does not require the sacrifice of principles and beliefs. Compromise can be a sensible exercise of quid pro quo where the perfect does not become the enemy of the good.    

We all know where the battle-lines are drawn. It is a debate over taxes and spending. What should the tax rates be across the board? How should it be redistributed, and to whom? One definition of politics is who gets what, when and where. We can live with that when things are going well but when things are going poorly, as they clearly are now, then it’s all hands on deck to right a listing ship of state. The country’s debt and deficit are symptoms of excessive and unrelenting spending that will bleed the nation dry if emergency measures are not taken to staunch it.

Because of the massive recession and a spiritless recovery, revenues have precipitously nosedived. But the worst financial crisis in 80 years has not arrested congressional spending, which is at a level not seen since the dark days of WWII, a shocking 25 percent of the Gross Domestic Product. Expansive entitlements of Social Security, Medicare and Medicaid presses hard on the spending accelerator and this is to say nothing of Obamacare that will add an estimated 20 million to the Medicaid rolls.

It is a situation that cries out for faster economic growth and reduced spending. Do tax increases spur investment? To sound like a Geico commercial: Does a drill sergeant make a good psychotherapist? One does not need a doctorate in economics to understand that you don’t raise taxes during a recession. Democrats need to give up the ghost that Republicans love to sacrifice the working classes for multi-millionaires. The fact is that multimillionaires and billionaires are as likely to donate money to the Democratic Party as they are to the Republican Party. What we’re talking about here is human behavior. The investor class is referred to as such because they invest money in the economy which, in turn, fuels job growth which, in turn, not only reduces government spending by reducing unemployment benefits but puts more money into the economy because people who are now working have money to spend which, in turn, increases employment.

The problem is that for both large and small businesses taxation is the single most important policy area that shapes their investment decisions. The investor class is very reluctant to hire when they are being saddled with more taxes. America’s corporate tax rate is 35 percent, one of the highest in the world. It is not a question of whether they can afford to pay more taxes, of course they can, the problem is that they just won’t invest at those tax rates which only hurts those we are trying to help — the unemployed. With the latest unemployment numbers the realities of business psychology may have finally penetrated the psyche of Democrats, including President Obama, who seem more inclined to extend the Bush tax cuts.

Spending cuts, however, are another matter. These cuts strike at the heart of entitlement. And, as you know, once you give somebody something just try to take it away. Possession is nine-tenths of the law. As a general proposition, everyone is in favor of spending cuts with this caveat when it comes to the cutting: Not me, not thee, but that guy behind the tree.

Democrats, on the other hand, would much rather keep these programs fully funded and pay for them with higher taxes. That, however, is not going to be an option. We need to hum a different tune or we will soon be hearing the dirge of an economic Armageddon. We need to reform the big spending programs and reduce its scope wherever we can. To accomplish this lawmakers will have to make deals. It can no longer be what’s mine is mine and what’s yours is negotiable — a Theodore Sorensen line. So there is going to have to be some horse-trading. Assuring the extension of the Bush tax cuts may require extending unemployment benefits; cutting back on other programs may require closing tax loopholes for the wealthy; extending the age requirement to collect Social Security may also require a willingness to increase the annual inflation formula, etc.

As of this writing, the two parties are inching closer to a settlement. Getting bogged down in political quicksand is one of the hazards of the business, indeed it is the business. But it better not happen this time. The public mood is ugly, real ugly, so if there are any jams, pickles or quandaries, Congress better start negotiating, bargaining and if they are still at loggerheads they better do some old-fashioned log rolling and close the deal. You know the routine when it comes to political trafficking: One hand washes the other; you scratch my back and I’ll scratch your back — with the objective being in this instance to induce growth and reduce spending. Taxpayers have to treat this as a back room, cigar smoked card game. When lawmakers come back whining, hand-wringing, pointing fingers that it’s the other guy’s fault, our response should be the time-honored riposte of all card players: “Shut up and deal.”       

 

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