DEBT CEILING FOLLIES.

Mike "Kids Prefer Cheese" Munger extends the argument that the debt ceiling isn't a credible commitment.

The idea of a “debt ceiling,” implemented in 1917, was to force politicians who wanted to increase spending, or to cut taxes, to take account of the way those two impulses added up. Of course, that seems silly in a way, because the level of spending is decided by legislation, and signed by the President, and the various tax rates are decided by legislation, and signed by the President. If spending is where the Congress and President want it, and taxes are where the Congress and President want it, then the annual deficit must be what they want. And the debt is just the accumulation of deficits over time.

This all worked reasonably well as long as fiscal conservatism was a separate norm that most politicians cared about. But, as I pointed out almost four years ago, there has been a decline in the norm of concern for deficits.

This side of the Big Rock Candy Mountain, though, fiscal conservatism takes a back seat to self interest.

Voters want increased spending, lower taxes, and lower deficits. That’s actually true; they really do want those things. There’s nothing irrational about that, though. I want to lose weight, eat an entire cake, and sit on the couch and watch Netflix. I really do want all those things.

Thomas Sowell famously said that the first rule of economics is scarcity; the first rule of politics is to ignore the first rule of economics. So politicians of both of the state-sponsored parties refuse to cut spending, maneuver to cut taxes for their most powerful supporters, and then complain loudly about deficits.

People often complain about the “irrationality” of politics, but there is nothing irrational about the process that has given rise to our crushing debt burden. Voters really do want lower deficits, provided it does not involve either cutting spending or raising taxes.

There's always an argumentam ad misericordiam for not cutting spending. "House Republicans have leveraged those alarming possibilities to secure painful federal spending cuts and aid program changes that could leave more people hungry, sick, and unable to afford housing." There's always an argument against raising taxes. "But if lawmakers continue to reject commonsense deficit reductions, then the budget deficit — and eventually middle-class taxes — will double once again."

Ultimately, Professor Munger notes, reality comes up to bat.  "Meaning that we can’t cut taxes, and we can’t raise spending, not really."  That sounds counterintuitive, but it's simply the government budget constraint at work.