Fritz Bartel, an Assistant Professor of International Affairs at Texas A&M and author of 'The Triumph of Broken Promises', delves into the political challenges of public spending cuts, especially in light of the Trump administration's goals. He discusses the difficulty of slashing entitlement programs like Medicare and Social Security, drawing parallels to historical austerity measures in the Eurozone. Bartel also contrasts how different political systems approach credibility in the face of strict economic necessities, revealing vital lessons from the economic crises of the past.
Cutting public spending is politically challenging as it often involves breaking commitments to essential entitlements like Social Security and Medicare.
Historical economic crises reveal varying capacities of governments to implement austerity measures, highlighting the significance of political will and public credibility.
Deep dives
The Role of Government Spending
The discussion highlights the current political atmosphere focused on reducing government spending, particularly under the Trump administration's 3-3 plan which aims for growth, oil production, and deficit reduction. Despite the high unemployment rate, which usually doesn't align with significant deficits, there appears to be a growing impulse to cut spending. However, significant challenges arise in this endeavor due to the limited discretionary spending in the U.S. government budget, which heavily comprises entitlements and defense. Cutting spending often involves breaching promises made to constituencies, such as seniors reliant on Social Security, making it a politically perilous task.
Historical Context of Austerity
An exploration of austerity reveals how different economic crises, like the Eurozone crisis and the 2008 financial downturn, raised the appetite for spending cuts despite widespread unemployment. The podcast addresses the difficulties in cutting spending when the political landscape is averse to diminishing popular entitlements. The narrative emphasizes that governments often lack the political will to deliver painful fiscal policies, particularly within democratic systems where voter approval is crucial. Understanding past instances where countries faced similar predicaments can provide valuable insights for navigating contemporary fiscal challenges.
Promises Made to Citizens
Historical promises made by various governments evolved during critical periods, including post-World War II, where Western countries promised prosperity and social security to ensure political allegiance. In contrast, Eastern Bloc nations promised economic equality and upward mobility, presenting different priorities within their respective systems. The podcast emphasizes that the disparity in fulfilling these promises ultimately led to economic distress and lowered trust among citizens, particularly in authoritarian regimes. Breaking these social contracts without adequate substitutes results in public unrest and challenges to existing power structures, as evidenced by uprisings in the Soviet Union.
Democracy and Economic Policy Shifts
The podcast discusses how democratic elections can create opportunities for implementing complex economic policies like spending cuts, drawing parallels with important political figures such as Ronald Reagan and Margaret Thatcher. Despite facing significant public discontent regarding cuts, Reagan was able to reshape the political discourse around government spending, framing it as foundational to economic health. Thatcher, too, utilized political events, like the Falklands War, to bolster her popularity and push through policies that would otherwise be controversial. The legitimacy afforded by democratic systems allowed for difficult decisions, indicating a unique interaction between public credibility and political will during economic pivots.
The Trump administration has come into office with big ambitions to lower the size of the US deficit. So far, a number of small items have been identified as possible waste. But to meaningfully bend the curve on spending, there's widespread agreement that we'd have to look at things like Medicare, Medicaid, Social Security and defense. This is hard stuff to cut and it's something that governments around the world have long struggled with. How do you pull back on a prior commitment that your constituency has come to expect? In this episode of the podcast, we speak with Firtz Bartel, an assistant professor of international affairs at the Bush School of Government and Public Service at Texas A&M. He is also the author of the recent book The Triumph of Broken Promises, which examines the simultaneous economic crisis in the US, UK, and Soviet Union during the 1970s, and how each country was forced economically to essentially "break promises." We talk about what it takes politically to maintain domestic credibility for any government while undergoing such wrenching choices, and why some systems are better suited for it than others.