The Tyranny Of The Status Quo Leads To Terrible Policy Decisions

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People have trouble with numbers. Phone numbers were designed by AT&T with short strings of numbers because we have trouble remembering numbers in strings longer than three or four. Now that people can dial by pressing a single button on their smart phones, we even have trouble remembering phone numbers.

Similarly, most people have trouble remembering when a law was passed, when a policy was last changed, or what the law/policy was before its most recent revision. The historical knowledge of the average American is not impressive. A result of the fact that people cannot remember numbers or history is that we deal with government spending, tax policy, and other laws and regulations almost exclusively in terms of percentage changes or revisions to whatever the current legislation says.

This creates what I like to call the tyranny of the status quo. The tyranny of the status quo means policymaking is debated only relative to changes from where we are now. This has many detrimental effects, particularly shortly after large changes in policy have been made.

When policy changes are discussed, the side defending the status quo tends to make it seem as if any change from the way things are now would have devastating effects. After all, how could we do less for, or ask more of, the group being defended? What is often ignored in such a debate is that less was done for or more was asked of the group in question just a few years or a few moments ago.

References to historical norms, trends, or what the situation was a decade or two ago are completely absent from the debate. The way things are now is all that matters when one side relies on the tyranny of the status quo.

It is admittedly difficult for almost anybody (even economists) to memorize current approximate values for the federal budget, various categories of tax revenue, spending on specific departments, the size of the economy, the annual government deficit, the national debt, tax brackets, and all the other statistics necessary to evaluate where we stand economically. When you try to add historical data to that memory burden, even fewer people can keep all those numbers in their head. This is an advantage to those who benefit from the tyranny of the status quo.

When we debate tax reform, Democrats insist that the personal income tax code must remain at least as progressive as it is now; higher income people cannot pay a smaller share than they do under the status quo. Republicans return the favor by demanding that marginal income tax rates not be increased. Rates cannot go above the status quo.

The tyranny of the status quo is not restricted to budget matters.

Voters in the U.S. used to vote on election day, or had to provide a suitable excuse to vote absentee. Now 34 states allow some form of early voting with no reason required. In some states, voters can cast their ballot six or more weeks in advance. Some candidates may not have even started to run their campaign commercials yet, especially in local elections. Yet defenders of early voting claim any rollback in the number of days of early voting is a diminution of people's rights, particularly groups such as the elderly and hourly workers. Any change to the status quo will be said to violate citizens' civil rights.

The Department of Education has existed only since President Carter, yet any proposed cut in federal funding for education is decried by the supporters of education funding (translation: teachers unions). The fact that public schools were almost certainly better before the Department of Education existed is irrelevant. Funding is mistakenly thought by many to measure quality in education, so the status quo in federal education spending is defended fiercely.

All government budgets-local, state, and federal-have supporters who insist that spending should remain at or above the status quo. By assumption, spending less must mean harm to someone. Again, the tyranny of the status quo rears its ugly head. No discussion about whether more can be done with less. Trying to figure out a measure of government productivity or services other than spending would be too difficult. It is easier just to rely on the status quo as the standard.

The current budget battles in Washington, DC are a perfect example. Democrats are strenuously defending every dollar of federal spending; in fact, they are asking for more to boost employment and help the economy regain its strength. All comparisons are to the status quo. But the status quo is not normal, or even near normal.

This is not a call for zero-based budgeting, where budgets are built from scratch each year with no reference to past budgets. The federal government, at least, is too big for that to succeed, and starting from scratch imposes a needless cost on everybody involved. Plus, people will refer unofficially to the most recent budget even when they officially are not supposed to do so.

However, zero-based budgets and the status quo are not the only two possibilities.

The latest figures on federal government spending are for the first quarter of 2013 and show spending running at an annual rate of $3.73 trillion. As recently as 2001, at the end of Bill Clinton's presidency, spending was $1.94 trillion. Adjusted for inflation, that spending would be $2.55 trillion in today's dollars. That means today's real federal spending is 50 percent above where we were just two presidents and twelve years ago.

In cases where the policy shift has been so dramatic, does reference to the status quo really make sense? Why is evaluating spending relative to where we are today a better idea then relative to where we were in 2001 when the economy was healthy and we also had a Democrat president?

Was President Clinton too stingy in helping the poor? Was he too easy on the rich? After all, he raised taxes on the rich, just like President Obama recently did. Yet, the economy was doing fine with a federal government that was 50 percent smaller.

At the end of Clinton's presidency the top 1 percent of income earners paid 34 percent of all income taxes. In 2009, the latest year with available IRS data, the top 1 percent paid 37 percent of all income taxes (see the data here). Since 2009, the stock market has recovered, bringing capital gains back, and the top marginal tax rate has been increased. Thus, today's top 1 percent are surely paying more than 37 percent of the total income tax pie. A good guess would be 40 percent.

Imagine if we could free ourselves from the status quo. Imagine if someone proposed that the federal government spend 20 percent more (adjusted for inflation) then it did at the end of President Clinton's second term. That would be about $3 trillion a year. The Congressional Budget Office is currently projecting revenue this year of $2.8 trillion. So if we spent 20 percent more than Clinton's last year, the deficit would be only $200 billion. If we spent 10 percent more than that last Clinton budget, adjusted upward for inflation, we would spend $2.8 trillion and the budget would be balanced.

The tyranny of the status quo leads to terrible policy decisions. Why should we make policy decisions based on comparisons to what we are doing now (the status quo) when what we are doing now has been a failure? Wouldn't it make sense to use a time when policies were working as a baseline?

President Obama's original legislative achievement was the largest stimulus package in world history. I will bet you thought that was a temporary increase in spending, but thanks to the magic of baseline budgeting and the tyranny of the status quo, spending has not declined back to its previous level. Because people cannot keep the numbers straight, or they foolishly believe politicians, most people do not realize that the federal government is still spending at an elevated level never seen before outside of periods of world wars.

When politicians in Washington, state capitols, county courthouses, and city halls make policy, they are easily captured by the tyranny of the status quo. If people could refer to historical examples a little more and not always have to measure every policy proposal only to where we are at that moment, I believe that our policy making would improve considerably. If imitation is the sincerest form of flattery, let's make policies that imitate success, not the status quo.


Jeffrey Dorfman is a professor of economics at the University of Georgia, and the author of the e-book, Ending the Era of the Free Lunch

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