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A Crisis Isn’t the Prerequisite to a Budget Deal

All of this indicates that the common wisdom is wrong: A crisis may not be the fiscal magical elixir common wisdom says it will be. Even if a crisis occurs, it either may not be attributed to the budget in a way that will change the politics enough to allow spending cuts and revenue increases to be enacted, or the opposite of what’s needed — spending increases and revenue reductions — may be the preferred policy choices at that time.

Relying on a crisis to get the discussion moving again is also a mistake because, contrary to popular opinion, that’s not what will actually change budget politics. It’s the second half of the equation — understanding the pain that a budget-induced crisis will cause — that will increase demand for action.

Recognition of this has been all but missing from the federal budget debate. While there has been a great deal of talk about what will happen to the economy as a whole if the deficit isn’t reduced and the debt isn’t stabilized, most of the charts, graphs and other analyses about what will happen haven’t been translated into what it will mean for individuals. Combine that with the “crying wolf” nature that many perceive about the previous warnings on the deficit, and it’s easy to see why the potential personal pain from not dealing with the budget is downplayed, given short shrift or completely ignored.

That’s what has made the need for lower federal spending and higher taxes the very tough sell that it has become.

When you compare the discussion about the so far very general macro dangers of federal deficits and government borrowing with the specific increase in taxes or spending reduction that are mentioned as possible solutions, it’s almost a political no-brainer.

But that type of specific information simply doesn’t exist. Instead of explaining what personal changes (buying a smaller home, renting instead of buying, not buying a new car as often or at all, having to work longer before retiring, etc.) might be forced on individuals if the deficit isn’t dealt with and debt isn’t reduced, voters are typically only presented with the options that the government should consider. Not only is that type of information not going to move the budget debate needle, it might very well end up resulting in the type of fiscal crisis that otherwise could have been avoided.

Stan Collender is a partner at Qorvis Communications and founder of the blog Capital Gains and Games. He is also the author of “The Guide to the Federal Budget.”

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