Old Roomates, Dirty Dishes and Budget Policies

During my senior year of college, I was lucky. I had two great living arrangements with good friends. During the school year I lived with my friend M in a little apartment two blocks from a trendy neighborhood, our campus was a brisk fifteen minute walk on a flat street away, and there were a couple of clean bars that had amazing specials within staggering distance. We split the kitchen work on the basis of cleaning up your own mess as soon as you made it, and if we were sharing a meal, the person who cooked did not have to clean. Every now and then dishes might have piled up for a day or two, but there usually was a good reason like finals or major papers taking up all available time.

At the end of my senior year, M moved away from Pittsburgh to go to grad school and the lease was up, so I moved in with half a dozen friends, acquaintances, their significant others, and a few drifters. The new place was a shit-hole, but I ended up paying less than $100 per month for a place to sleep and hangout. I had a blast, as the new place was in a dense mixed-use neighborhood with a couple of good sports bars and I was spending the summer with a bunch of people who knew where to find fun.

The biggest problem was a collective action problem. The house had enough people paying rent that the informal social pressures and ties that encouraged individual responsibility started to break down. One roommate, X, in particular refused to do dishes, or to clean the collectively used George Foreman grill after he used it, no matter how disgusting it was. This pattern of behavior was well known when I moved into the place, and as the summer wore on and as third level subleasers moved in and out, the place became a pigsty as people stopped cleaning up their entire mess or doing any additional cleaning. Several of us eventually had to waste a weekend cleaning just to avoid the potential for pests, food poisoning and general grossness.

So by now you ask, how the hell does my living situation in college relate to budget deficit policy analysis? Simple, these two cleaning dynamics illustrate two very different political systems. M and I were able to maintain a structurally clean apartment, sometimes we over cleaned, and sometimes we under cleaned, but over a reasonably short period of time, the apartment was tidy. The combination of her ability to arch an eyebrow when I left my plate on the coffee table and clear levels of accountability made this arrangement work pretty well. We respected each other and the common understanding that the apartment should be reasonably clean.

The second house was running a perpetual cleaning deficit as there were numerous defectors from any cooperative strategy of minimizing health code violations. Any one who took the time to clean the kitchen and scrape the dirty plates of four days worth of food was being played as a sucker as responsibility dodging defectors would continue to use the recently cleaned plates without doing dishes for the next three months.

Robert Kutner at the American Prospect believes, with very good reason, that the American political-fiscal discourse resembles my second set of roommates. Republicans wreck the place, distribute spoils to their buddies and supporters, and then the Demcrats who are elected afterwards have to spend most of their time cleaning up the mess so that the next Republican can promise to be irresponsible again and throw a good old party. This is a nasty cycle and it is an irresponsible cycle.

The relevant question is what should the general thrust of Democratic fiscal and budgetary policy be in the next four to eight years? Should the Democrats again be the responsible party, raise some taxes, cut some expenditures on the military, and try to re-achieve a structurally balanced budget so that over the course of a business cycle the budget is even, or even be slightly ambitious and run a structurally surplus budget to get ready for the Medicare freight train coming down the pipe? Or is this a sucker's bet that the responsible actions will just allow another Republican to run against the tax and spend Democrats who are not even able to enact significant and popular social programs because they are being responsible? And therefore the smarter policy and political play is to screw the deficits and keep on spending?

I personally lean towards deficit control as I am particularly worried about the anticipated increase in Medicare expenditures in the next couple of years. Assuming a Democratic President with a Democratic Congress in 2009 means a massive wind-down of spending in Iraq by FY-10 and most of the Bush tax cuts are sunsetted, getting to a closer to balanced budget will not be that difficult. One of my major long term concerns over perpetual deficits is the interest expense which is the way of the present hogtying the future. Hilzoy at Obsidian Wings looks at the cost of interest on the federal budget and it is a significant fraction of total expenditures

I thought I'd post some simple figures from the Treasury Department's figures for FY 2006. All figures are in billions of dollars.
Total Receipts: 2,407
Total Outlays: 2654
Total Deficit: 248
Total Spent On Debt Service: 405.9

Yes, that's right: had we simply paid our bills on time, more or less, we would not only not be running a deficit, we would have $157.9 billion dollars to either refund to taxpayers or spend on some new program.

Balancing the budget, or at least substantially reducing recurrant deficits will not eliminate the interest expense, but it will decrease its share of GDP which should free up other resources. This was essentially the Clinton-Gore economic plan, get the country's finances back to a structural balance, or even better to run a slight surplus to reduce the impact of long run interest expenses so that when the Baby Boomers retire the future will be only concerned with itself and not paying off the trip to Tijuana that was the Reagan-Bush era.

The crux of the question for Democratic leaning policy-political wonks is an estimation of the probability of a Republican being able to win on a platform of "Party On in '12." If one thinks that this is a reasonably likely event, than paying attention to the deficits in the short to medium term makes no sense if you assume that the GOP is more like my roommate X than my roommate M. If one thinks that this is a low probability event, the time and effort spent in cleaning up the budgetary mess of the Bush error will lead to enough highly probable and significant long term rewards to be worthwhile.