The U.S. federal-budget deficit for the fiscal year that ended at the end of September, 2016, represented a reversal on the six-year run of declining deficits. The $587 billion deficit is equivalent to 3.2% of GNP; the previous year’s deficit had been $438 billion, which is 2.5 percent of the GNP. The underlying reason for the altered trend has to do with democracy itself—something notoriously difficult to budge.
The revenue loss from the extension of tax breaks for businesses and individuals, plus the refusal of Congress to “pair the tax cuts with some tax increases on wealthy Americans” is the immediate cause. To be sure, President Obama’s proposed tax could be viewed as being unbalanced given the emphasis on the wealthy; refuting this imbalance came at the expense of a larger fiscal balance, given Congress’s extension of the tax breaks. Yet Congress could have substituted another sort of tax to counter the deficit-increasing effect of the tax-cut extension. The refusal to mandate such balance may be due to democracy itself.
In short, elected representatives have a political incentive to provide fiscal benefits to constituents and a political disincentive to extract corresponding fiscal costs. The decoupling itself can be viewed as a vice of democracy. With elected representatives legislating, it is not clear whether they can employ enough self-discipline to couple tax increases or spending cuts to tax cuts. With a federal debt just short of $20 trillion at the time, the systemic imbalance can be said to be inherent to democracy itself, and ultimately to the refusal of an electorate to insist that fiscal benefits be paid for in a reasonable time. Outside of dire emergencies, such as the Great Depression and World War II in the twentieth century, the abstract ideal of balanced government revenue and expenditures should not be so difficult to achieve in practice; so that it is testifies to the difficulty of self-government, whether within the psyche or the polis. The difficulty, in other words, is systemic—in human nature itself—and thus particularly onerous to being corrected.
The only solution I can see is the body politic setting for itself an automatic “coupling” mechanism for “the future” (and thus not so scary). Such a device of parchment would have to be sufficiently protected from the urge for “something for nothing today” and yet flexible enough should an emergency occur. The key might be a constitutional amendment that is sufficiently rigid that it would hold under normal circumstances (including even minor wars), and sufficiently flexible when it really matters. Therein would lie the rub: the possibility that the accommodative feature(s) would be exploited. A constitutional amendment subject to jurisprudence from the judiciary might capture the balance in terms of solidity and flexibility that so alludes fiscal balance in representative democracy.
1. Jackie Calmes, “U.S. Deficit Increases to $587 Billion, Ending Downward Trend,” The New York Times, October 14, 2016.