The America Speaks Budget Deficit “Townhall” of June 26: Folk Economics In Action Pt. 1

I have already reported here on the current rush to cut public budget deficits in the US as well as elsewhere in the developed world but this effort is not just an economic abstraction or future possibility:  here in the US, the Senate has just voted down extensions of unemployment and other social benefits in part on budget fears.  Three foundations, led by the budget-deficit obsessed Peterson Foundation, hired the non-profit AmericaSpeaks to organize one of its “21st Century Townhalls” on the topic “Our Budget, Our Economy” which was supposed to collect “America’s” views on budget deficits and federal spending.  Besides the Peterson Foundation, the John D. and Catherine T. MacArthur Foundation and the Kellogg Foundation lent their credibility and contributed funds to this event as well.

Having heard about these meetings and concerned that a biased sample or biased views on deficits and deficit spending were being promoted there, I decided to show up to the local meeting for Silicon Valley to be held in the conference room of a large law firm located in East Palo Alto.  My own leanings within folk economics may already be obvious to readers of this and my other blog:  I have already been convinced that deficit spending is a necessary evil not only now during the deepest recession since WWII but also on longer term projects like carbon mitigation and developing oil-independent transport infrastructure, until such time that raising taxes will no longer hurt economic recovery.   However I will attempt here to provide an account that is as descriptive as possible and avoids simply a confirmation of my biases.  Others who have attended and/or analyzed these forums have presented views that reinforce what is largely my own view of budget deficit concern and hysteria (Dean Baker, Digby, Richard Eskow, Dave Dayen at Firedoglake).

Account of the Townhall

Given my prejudices, I went in with the preconception that this was going to be an event where the deck had been stacked in favor of cutting spending and where participants had been culled to attempt to “bias the sample”.  I didn’t pre-register and showed up at the swank offices of this Silicon Valley law firm early on Saturday morning.  I soon learned that “America Speaks” is an operation that attempts to organize massive simultaneous discussion/townhall events connected by a video feed from a central location.  Just from a pure social science point of view these mass events cannot be scientific because they involve a self-selecting subgroup of people, like myself, who are willing to spend 6 hours of their time in a room discussing and opining about an issue.   While I was expecting the “America Speaks” folk to look like Young Republicans they appeared to be a demographically diverse bunch of employees, permanent or temporary of this non-profit that organizes these meetings.

About 150 of us were seated at tables of approximately 10 participants with an American Speaks facilitator at each table, who I am guessing was paid, and a volunteer participant sitting at a laptop who was the table’s secretary.   We were handed a packet of materials which included the budget analysis and the agenda for the day.  A representative of the local sponsor of the event Joint Venture Silicon Valley stood up and told us we looked like a cross section of Silicon Valley which was one of a number of strategic falsehoods uttered at the event.  The crowd was obviously much whiter and older than Silicon Valley by far, with an under representation of Asian and Latino residents.  A large screen with a video projector soon became the focus of the meeting.  In the room, there were also a professional soundman and a professional video crew of two who were capturing the interactions at tables.

This is AmericaSpeaks’ brief summary video of the proceedings at the AmericaSpeaks event.

The focus then turned to a broadcast via the video projector and sound system, apparently over the Internet because the picture and sound were sometimes not well synchronized, from the main location in Philadelphia where the two leaders of the event from America Speaks, founder and CEO, Carolyn Lukensmeyer and a man whose name escapes me, introduced first the funders of the event and the ground rules.  There was then a parade of speakers from both the funders of the event and the government sponsored deficit commissions who in various ways intoned the importance of this event.  There was an interesting and rather jarring comment that Lukensmeyer made that the video crews were recording the event to serve the needs of the events’ funders, which seemed to detract from the ostensible public, quasi-governmental purpose of the event.  We were given radio frequency response pads with which we were to indicate our answers to demographic then opinion questions, the results of which were within seconds registered from the 3500 participants around the country.

While I was expecting pure budget worry/hysteria to be ladled out by the speakers, there were a few deviations from this “line” that I think were worth noting:  Lukensmeyer and David M. Walker, the CEO of the Peterson Foundation were careful to note that the economy was in a deep recession and that raising taxes and cutting spending now MIGHT not be advisable.   This acknowledgement of some form of Keynesian wisdom at least as regards deep recessions was also reflected in a few questions at the beginning about current economic conditions.   In those questions the assembled participants showed themselves at least to be “crisis Keynesians”  with a plurality of 32% “supportive” and 19% “somewhat supportive” of spending on stimulus even if it raised the deficit (11% were “neutral”, 12% “somewhat unsupportive” and 26% “unsupportive”).   A majority of 61% thought the government should do more to strengthen the economy, 14% “about the same”, and 25% “less”.  Those critical of the enterprise may well view these statements and three brief questions as simply a “fig-leaf” for an enterprise that may help cast the US and the world into a deeper recession and/or increase social inequality and poverty.  Others may see that even these well-financed activists for cutting spending acknowledge the truth of weak aggregate demand in the recession.

Reinforcing the fears of those critical of the enterprise were the utterances of the two sitting Republican Senators who offered welcoming messages on the video feed, Judd Gregg and Pete Domenici.  Gregg implied and Domenici stated that budget deficits had CAUSED our current economic situation.  When Domenici spoke what I consider to be a falsehood, I could not contain myself and said “False” and was reminded by the table moderator that “everybody needs to have their turn”.   Democratic Senator Dorgan and Rep. Shaka Fatah did not offer anything remarkable that changed the framing of the discourse laid down by Lukensmeyer and the representatives of the three sponsoring foundations.

The “Values” Section Reinforces a Problematic “Frame”

In an acknowledgement that values play a role in economic decision making, AmericaSpeaks forced participants to choose between three choices, at least two of which were designed in a manner that reinforced a highly problematic “frame” for the issue.  These choices were introduced to us as a prelude to the “tough choices” that we would be engaging in in the second half of the event.  The first seven point scale asked us to choose between “Taking care of the current generation” (“1”) and between “Taking care of future generations” (“7”).  Contained within this choice is the set of assumptions of the deficit hawks that spending now endangers future generations and therefore engaging with it “forced” the participants to accept the framework that current and future generations were competing with each other over a fixed pot of money.  Most economists would not accept the view of the economy contained within this choice, seeing “flows” in the economy as being as important as “stocks” (stores of value), though some of these would be more or less concerned about the effect of government budget deficits.    Derived from this one would expect the economically informed or intuitive folk economists to select choice “4” to deny either side of this false choice and in fact a plurality of 42% of the participants selected this choice, while 22% selected “5” and 15% “6” biasing the distribution of responses towards the ethically validated “caring for future generations” that also is the argument which many deficit hawks claim is the result of cutting social spending.

The second “Values” forced choice was somewhat less controversial in that it asked whether the burden of reducing the deficit should be shared “equally” (choice “1”) or greater burden for reducing the deficit should be placed on the “those that have more ability or capacity” (choice “7”).  Here most elected to remain with the current system of progressive taxation with choice “5” garnering 20%, “6” 24%, and “7” 20%.   The problematic element here is that the Values section was introduced as “What are the core values that should guide our decisions about our country’s fiscal future”, which might include running budget deficits into the future or increasing them.  The second choice, in an ideological manner narrows the choice to “reducing the budget deficit” from “fiscal future,” a much broader category.

The final of three choices also presented in simplified terms what is a more complicated political, ethical and fiscal reality. The final choice was between “1” “The government’s responsibility to take care of the most vulnerable people and “7” “Individual responsibility to take care of one’s self”.  While this choice pretty much reproduces the American political liberal-conservative divide, it ignores the idea of government delivered services for “everybody”.  Additionally it suggests that the network of social responsibilities by individuals that make up “government” are the opposite of “caring for oneself”.   While the latter interpretation may seem tendentious, the political choice between offering universal benefits (Social Security, Medicare, single-payer healthcare) or need-based benefits (welfare, Medicaid) has very serious ramifications for the efficiency, fiscal impact, and political durability of social service programs.  The response to this question was the most muddled though slightly biased towards government care of the neediest (“1” 13%, “2” 18%, “3” 15% “4” 21%, “5” 12%, “6” 13%, and “7” 8%).

Tough Fiscal Choices Combined with Political Choices

Having “biased the sample” in a manner that might have appeared subtle to those who were not already wary of the agenda of the organizers of the event, the bulk of the time was spent in an exercise where the participants were to deliberate among themselves and make individual decisions about 42 options with regard to either cutting spending or raising taxes to closing the presumed budget deficit in 2025 by $1.2 trillion.

Controversially, and others have commented on this already, the accounting framework within which the Deficit Commission is operating, lets the Social Security budget, a program that is projected to run without incurring any deficits  until 2037 unless it is used as a slush fund for to make up for revenue shortfalls (tax cuts) in other categories, flow into the general ledger.  This is the preferred schema of the deficit hawks, who seem to want to “smear” Social Security with as much of the “fault” for budget deficits as possible.  The AmericaSpeaks exercise was structured this way as well, with a simple ledger with “spending” on one side and “revenues” on the other.

The booklet that was issued also had a page within which “Approaches to Changing the Health Care System” were outlined among which was “Single Payer”.  There were no action items on this page and Lukensmeyer skimmed over this to go on to the “forced choice” action items that involved either cuts or no change to spending or increases in revenue via taxation.  We were additionally allowed to submit our own options via the computer and notetaker at each table and apparently enough tables reinserted “single payer” as an option for it to be mentioned by Lukensmeyer in her wrap up speech.  According to most assessments of most analysts that healthcare costs are the underlying driver for long-term deficits; the fact that government supervised universal health care systems with cost controls (single-payer and all-payer), which in other countries have yielded equivalent or better health outcomes with 50-65% of US expenditures, were taken off the table undermines the seriousness of both the AmericaSpeaks and the budget deficit commission proceedings.  While the appearance of “pluralism” apparently was vital to AmericaSpeaks its leaders might be concerned about angering its funders, at least one of which is no fan of expanded government services and regulation.

Within then the deficit-hawk-defined framework with pluralistic trappings, the participants still remained surprisingly resistant to slashing social spending in favor of raising taxes on the wealthy.  The results of the forced choice poll of the 3500 participants regarding health care spending in existing programs were a plurality for “no change” 38% with 27% for cutting healthcare spending by 5%, 16% for cutting spending by 10% and 19% for cutting spending by 15%.   There were for Social Security a wide range of choices and here the deficit hawks won at least one talking point where 52% said that the age for full benefits should be raised to 69 but 85% said that more of the income of high earners should be subject to SS taxes by moving eligibility up to 90% of total earnings, while 23% said there should be no change.  A slight plurality in non-defense spending said it should not be changed (32%), while 51% said defense spending should be lowered by 15% with an additional 34% saying it should be lowered by lesser amounts.

In the area of taxation there were three units:  change of existing taxes, reform of the tax code and new taxes.  Participants had to choose between changing existing taxes and a set of pre-defined reforms of the tax code that would supposedly increase its efficiency.  As none of us at our table were tax lawyers or accountants and the 10 reforms of the tax code could have contained hidden agendas, I elected to choose the existing tax option where I could pick and choose.  In the “Raise Existing Taxes” bracket, the group could choose more than one or “no change”.  44% chose “no change” while 68% (some must have cheated) chose a 5% millionaire’s tax, 48% chose a 20% marginal tax increase in the top two tax brackets and 18% chose a 10% marginal incrase in those brackets.  48% chose raising the taxes on capital gains and dividends for those in the highest tax brackets by 5% and 59% chose to raise the top corporate income tax from 35% to 40%.  On the other hand 20% chose to raise everyone’s taxes by 10% of existing tax rates and 8% chose to raise taxes on everyone’s incomes by 20%.

In “Reduce Deductions and Credits”, 51% elected to limit corporate accelerated depreciation for equipment purchases, 45% elected “no change”.   It is not clear from the results how many elected to “Reform the Tax Code” via the 10 measures suggested though the read out I have states that 50% elected “No change”.

Finally, in “Create New Taxes”  a whopping 64% favored a carbon tax while 61% favored a securities transaction tax.  A 5% V.A.T. (national sales tax) polled 27% while 35% elected “No change”.  Finally in additional options, enough tables suggested reducing defense spending by more than 15%, remove the limit on earnings subject to Social Security payroll tax, reforming the tax code to just a flat tax, and the aforementioned single-payer healthcare system to be announced at the end of the event by Lukensmeyer.

About My Table

Finally, I want to end this account of the Townhall by describing how things worked out at my table.  In general, despite my misgivings about the framework and the attempts to bias the results, I enjoyed interacting with the good people at the table where I would say the median age was probably 55-60.  Most of us were probably left of center, though one of us seemed to be troubled by the willingness of the people at the table to agree to essentially no change in spending with the exception of cutting military spending and to raise taxes mostly on the rich.  Our secretary was wearing a pro-single-payer tee-shirt and she and another member of the table had heard about the event through the liberal-left action group  There were no Tea Party members at our table and even that one person who seemed caught up in the discourse of self-sacrifice and benefit cuts, was seemingly a liberal in her interests.  There was one fellow who had his own public-access TV show and was prone to entering into quasi-rants that were slightly off-topic, though he didn’t succeed in derailing the overall discussion, in part due to the intervention of the table leader.  Most decisions at the table about individual measures were made on a 6 out of 10 vote, despite what appeared to be general commonalities of interest and orientation.  If we had worked harder together on individual issues, we might have come to more of a consensus.

The good feeling of working together with civic-minded people may have been part of the point of this whole townhall, a point that may have, as well, its political uses given the structure of the event and its sponsors.  I will continue my analysis of this and other meta-economic issues raised by “Our Budget, Our Economy” in the next post.

About Michael Hoexter
I'm a clean energy marketing and policy strategist and consultant based in the San Francisco Bay Area.

One Response to The America Speaks Budget Deficit “Townhall” of June 26: Folk Economics In Action Pt. 1

  1. Pingback: The America Speaks Town Hall Pt. 2: Implications for Folk Economics and the Politics of the Deficit Commission « Meta-economics

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