The other day Federal Reserve Chairman Ben Bernanke stirred up some interesting reactions. He said in a speech that Americans are faced with having to accept higher taxes or readjustments in programs like Medicare and Social Security, in order to avoid ever-increasing budget deficits that will be catastrophic.
Now I’m not an economist (see former Undersecretary of Commerce Ev Ehrlich’s blog for such matters). But I started thinking about Bernanke’s comments — and the reactions from some Republicans and assorted “anti-tax patriots” who came out with guns blazing (metaphorically….so far) — from a psychological perspective. I find some psychological attitudes and ideology about the role of individuals in society driving the reactions to what Bernanke raised. They’re visible as well in the angry, hostile response to the health care legislation and, more broadly, the fear and loathing of “government takeover.”
Here’s what Bernanke said:
“These choices are difficult, and it always seems easier to put them off — until the day they cannot be put off anymore. But unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth.” And, “To avoid large and ultimately unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.”
In The Washington Post story reporting Bernanke’s speech, writers Neil Irwin and Lori Montgomery point out that:
“…the economic downturn — with tumbling tax revenue, aggressive stimulus spending and rising safety-net payments such as unemployment insurance — has driven already large budget deficits to their highest level relative to the economy since the end of World War II. This has fueled public concern over how long the United States can sustain its fiscal policies.
The upshot of what we’re facing appears to be this: Our current way of life is unsustainable. So what’s a possible remedy, according to Bernanke and others? Raising taxes, not lowering them. Cuts in Medicare benefits. Raising the retirement age. And bringing rising health care costs down. To do any or all of that requires a different mentality about our responsibility and obligations to others in our society. And it’s not pleasant. That’s the psychology part.
That is, we’re highly attached to the ideology that we are and should be separate, isolated individuals; that each of us should look out for one’s own self-interest. And we define that largely by material acquisition and money. Hence, opposition to “redistribution” of wealth, even though that’s exactly what we do via taxes that support all the services that we expect society to give us. We also define our self-interest as psychologically healthy, mature, even; the hallmark of a succesful life. Those that don’t do as well are not my problem.
Except now they are: We’ve been hit with the reality that our world is so interconnected that someone else’s “problem” is also our own. To consider subordinating some of our personal wants and goals for the larger common good feels foreign and frightening. Yet that’s exactly what we’re faced with doing. It begins with shifting our mental perspectives towards recognizing that we’re all in the same boat — not just we Americans, but all of us in this global community. And it means stimulating the emotional counterpart of that perspective — the hard-wired capacity for empathy. And then, making the sacrifices that result from embracing the new realities. The economic collapse has made the need for those shifts very apparent. We’re faced with learning to sacrifice in ways that we’re not used to doing, in order to thrive as individuals and a society in the world as it now exists.
But such shifts meet with strong, ingrained resistance and denial. They’re fueled by unrealistic, almost delusional notions that pursuing self-interest at all costs will lead to success and well-being. So, for example, Republicans pounced on the suggestion of increasing taxes. They also went after remarks by Paul A. Volcker earlier this week, who spoke very directly in favor of higher taxes. He said that the U.S. might have to consider a European-style sales tax, known as a value-added tax, to close the budget gap. He said “If at the end of the day we need to raise taxes, we should raise taxes.”
That’s a pretty direct, unvarnished statement of reality. But Republicans accused Obama of plotting a big tax hike, for nefarious purposes. ”To make up for the largest levels of spending and deficits in modern history, the Administration is laying the foundation for a large, misguided new tax, a first-time American VAT.” Sen. Charles E. Grassley said in a statement.
Onward goes the struggle between facing reality and dealing with it, or not facing it….and still having to deal with it