Wednesday, September 29, 2010

Squeezing the Balloon

Continuing with yesterday's thought...

Both of our major political parties are full of very simplistic ideas about how to address the various problems we face as a nation. Some of these ideas aren't bad, but most of them only prescribe for the symptoms and not for the underlying problems ... they make the rash go away for a while, but don't do anything about the virus that causes it and will make it come back again later.

The real problem about our government's approach to solving problems, no matter which party is in power at any given time, is that it doesn't view our problems as being interconnected, such that actions which are taken in one area may have unintended consequences in another. It's rather like squeezing a balloon - if you take a partially-inflated balloon and squeeze it in the middle, it bulges at both ends. If you squeeze one end, the other bulges. Everything is connected to everything else, and if all you do is pump money and effort at one problem, you create (or exacerbate) another problem somewhere else.

The economy is the classic example. Here are a few examples of dealing with the economy as an example of squeezing the balloon:

People demand low prices on the things they buy. In order to reduce the prices they charge and still show a profit, businesses curb their own costs in various ways: by demanding lower prices of their suppliers, by demanding increased productivity from their workers, or by getting rid of some of their workers. This leads to unemployed people who, because they now no longer have jobs, are unable to pay even the low prices they demanded on goods in the first place.

Republicans tell you that the solution to every problem is to reduce taxes so that individuals and businesses can keep more of the money they earn, pump it back into the economy, and generate more business. That's a reasonable theory for the long term, but it doesn't really do much in the short run. Businesses don't hire workers because their taxes are low ... they hire workers because they see that hiring more workers will improve their bottom line. This means that reduced taxes improve profitability on current business but don't necessarily improve future business. In addition, because the government has reduced its income from taxes, it faces a revenue deficit which must be made up somewhere else. The classic Republican argument is that reduced taxes stimulate businesses to do more ... uh ... business ... such that the income lost in lower taxes is made up by a larger volume of business income to be taxed at the lower rate.

Did you follow that? It's a good theory, but I think it works a lot better when applied to a booming economy rather than one that's just gasping along.

Look at the other side of the argument for a moment. Democrats believe that the answer to most problems is increased government spending and new programs. But if you squeeze that balloon, you quickly see the interconnected problems. How do you pay for the programs? If you impose higher taxes, you stifle businesses and individual initiative. You could cut other programs, but each one has its own constituency that will fight you tooth and nail. You can borrow the money, but that just creates new costs in the future when the interest on the loans comes due.

It's all interconnected. You can squeeze the balloon all you want, but all you'll do is change its shape.

I don't know if I've done a very good job of starting out this discussion. What I'm trying to do behind the scenes (being a visual sort of person) is diagram all this out in a way that illustrates the interconnectedness of all of our problems and - perhaps - suggests some new approaches to solving them. No solutions I or anyone else can propose will be easy, popular, or cheap ... but one thing I think I can guarantee is that any solution that doesn't address more than one aspect of a problem won't work any more than squeezing the balloon will.

What do you think? What are your ideas about addressing interconnected problems?

Maybe we can work together to squeeze the balloon from both ends. It can't hurt.

Have a good day. More thoughts tomorrow.



Gilahi said...

In castigating the politicos for offering simplistic solutions, I fear that you overlook the cause of this phenomenon: The intelligence of the average American voter. If expounding simple solutions didn't get them voted into office, then they'd start expounding the deeper ones that might actually get things fixed.

Raquel's World said...

I just say be careful how much you squeeze the balloon for eventually it will pop.

Anonymous said...

If the intelligence of the American voter is declining, responsibility will have to be placed at the door of our unionized teachers, fearful schoolboards, and school administrators who buy into educational theories with no experiential basis. Only an educated populace can sustain a democracy, and if the education system turns out ignorant voters, future downfall is inevitable.

My generation was taught in elementary and high school by returning GI's who got their degrees through the GI bill (or their wives taught us). They had risked it all for America, and they did their best to preserve its most important asset--an educated electorate.
Eminence Grise

Mike said...

'We can work together to squeeze the balloon from both ends.'

This sounds like a good campaign slogan for the Bilbo for President campaign.

KathyA said...

I'm not squeezing anyone's balloons!