My Fiscal Cliff Deal

What happened to the tea party? When Republicans ran on adult decision-making in 2010, prodded by the tea party, they gained ground. When they backtracked in the latest election to offering only the slightly different, but less hip, version of democrats that we experienced through the 2000’s, they went nowhere.

If I were a Republican, I’d cut a ‘fiscal cliff’ deal like this.

I’d say that I don’t want it and think it will damage the economy further.

I’d make it clear that cutting government spending is my preferred solution because it’s responsible and puts more resources back in the hands of citizens for them to choose how best to use it and gets it out of the hands of the very politicians that everyone distrusts, according to polls.

I would illustrate how I think government is being a bad partner with private citizens with the following simple example.

Two friends, Mr. Private and Mr. Public, partner to start a business. Mr. Private is a great salesman. Mr. Public is great at managing operations. They decide to split their profits down the middle (this is only a simple example, not an argument for 50% tax rates).

This arrangement works for a while, but as the business grows, Mr. Public begins thinking he’s more valuable than Mr. Private and deserves more than 50%. After all, customers are raving about how well the company fulfills its orders.

Mr. Public asks for 60% of the profits since he believes that his well-run operations are contributing to sales. Mr. Private begrudgingly agrees, but starts to slack off since he’s not making as much. Mr. Public sees Mr. Private slacking off (not knowing why) and demands 70% of profits to be “fair”, since it appears Mr. Public is now doing most of the work. Mr. Private slacks off even more and sales suffer.

What’s going on? Mr. Public overvalued his role in the partnership. He’s valuable, but so is Mr. Private. Mr. Public cut off his nose to spite his face when he took more of the profit and lowered the incentives for his valued partner to contribute his talents to the partnership to grow sales.

The better way for Mr. Public to grow is with the business, rather than reduce incentives for his partner to contribute.

Finally, I’d pull a John Roberts and put the accountability back on the people.

I’d say that based on the election result, I won’t stand in the way of giving the voters what they appear to want. While I think they are cutting off their noses to spite their face, it has become clear that reasoning won’t convince them. As many good parents realize as they rear their children, they sometimes have to sit back and let their kids make mistakes.

Experience is the best teacher. It’s painful for the parents and kids, but valuable.

So, no longer can Democrats say that they could fix the economy if Republicans would just get out of their way.

We’re out. Fix it. If things don’t go well, own it like a man. If they do go well, I’ll be the first to congratulate you.


3 thoughts on “My Fiscal Cliff Deal

    • As always, thanks for the comment, dave. I’ve love to learn more about why you think the parent/child metaphor falls flat.

      Regarding your NY Times link, what’s left out of that story is that the main reason there’s competition for businesses to attract local governments is that the local tax rates are high enough that politicians can use them to game those few cases to make it look like they’re attracting jobs.

      We had something similar a few years back where I live where the state offered tax incentives to keep an automaker’s plant here. One representative in our state pointed out that if we just made taxes low for all businesses we could attract a bunch of business, rather than just cutting special deals.

      Of course, the other politicians weren’t interested in that. It’s much harder to convince voters that a general policy is working. Less hard to point at the one case where the politicians sacrificed us for a few jobs.

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