Cognitive Psychology and why the Sequester is not all bad

Posted by tobymuresianu on Mar 1, 2013 in Politics, Thoughts |

Many people have commented that American politicians are acting like fighting children. It does feel similar.

“Johnny doesn’t pay enough taxes!” “Barry’s being greedy!”

Eventually, most parents in that situation would snap, and arrive at the same solution:

“If you don’t learn to cooperate, nobody gets what they want!”

“But that’s not fair!” both children would reply.

Sometimes, though, fair doesn’t matter.

The difficulty of cutting things has become a key problem with our democracy. If you propose to cut one program, its patrons line up to defend it and point fingers at other people’s wasteful programs. And it works – cuts are often avoided.

In cognitive psychology you often hear the term “losses loom larger than gains”. People are much more averse to parting what they already have than they are to gaining something of equivalent value. For example, if you offer to sell someone a coffee cup, they won’t be willing to buy it for more than a dollar or two. But give them the same coffee cup and a week later offer to buy the same cup back, and they won’t part with it for less than five or six.

While people know we need to make big cuts in general, the cost of fighting over specific cuts is too great to make whittling down to a budget a good approach. A better way is to make larger general cuts that people agree to in principle and then add back what you really need. If we’re going to endlessly argue about our national priorities, let’s do it from a position of fiscal solvency first.

It’s also telling that the cuts are not always as dire as we imagine that as soon as losses in funding become a reality, the heads of the programs change their tune from defending all their programs to prioritization.

“That’s not fair,” says the military. “We are risking American lives. We should be cutting low-value, expensive programs instead.”

Where were these low-value, expensive programs during previous budget discussions?

“This is ridiculous!” say social programs. “We have to furlough all our employees instead of just laying off underperforming and inefficient ones!”

Why did you have underperforming, inefficient employees still working there?

“The timing of the cuts is terrible!” say various sources.

But has there ever been a time that people described as good for cuts?

Much is being said about how this is a self-inflicted wound. Let’s not ignore the biggest self-inflicted wound – the much harder eventual economic collapse that results after years of spiraling deficits.

Every time there’s an economic crisis – take the housing crisis, for example – people afterwards ask “how could the people in charge not have seen this coming?”. And when you look closer, you find people who thought things like “it’ll be fine” or “we’re different” or looked the other way because they were benefiting financially and it was easier to keep doing what they were doing. The national debt is a crisis everyone sees coming, but nobody’s done anything about, and there’s no shortage of people saying “it’ll be fine” because – well – we’re all benefitting financially and it’s easier to keep doing what we’re doing than bear psychologically painful short term cuts.

But no matter how politicians spin it or explain that the US is different, when political expedience runs into the brick wall of economic truth, economics will win every time. Spending far beyond your means for years catches up with everyone eventually, and we are no exception.

The sequester is tough medicine. But let’s not forget that the scale of the cuts is not massive – it’s a reasonable cut in the overall budget. Now there are petitions for programs being cut to be allowed to adjust how they want the cuts to be made – I hope these bear fruit. But either way, hopefully it will be a wake up call to politicians and programs to make more intelligent sacrifices earlier, because they know that if they act like children forever, nobody – including them – will get what they want.

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