“Pie” Thinking: What You Must Know But Politicians Won’t Discuss

Successful spending, tax, and budget decision-making requires trade-offs. Acknowledging those who lose when making trade-offs has always been difficult for elected officials, advocates, and pundits alike. Yet, making course corrections for government policy means changing relative priorities and has never been more required than it is today. I’m not just talking about deficits and the rising debt being left to future generations. Over recent decades Congress has oriented spending less and less toward the needs of our time.

Very early in my career, the Hubert H. Humphrey (HHH) Building opened, adopting the then-modern version of an open floor plan with movable walls from north to south, east to west. Before the first walls had been anchored, some of the building’s new occupants complained that they found their offices downsized by a neighbor each day they arrived at work.

As with the floor space for the new HHH building, every decision to devote existing or new public resources to one effort means that those dollars will not be dedicated to others. Only 100 percent of a pie can be allocated. Changes in the level of economic growth, tax rates, or borrowing may raise or lower the amount of filling in the government spending pie, but still, only 100 percent of that total can be spent. If one group’s share of government spending increases from 20 percent to 25 percent, the aggregate share for other groups declines from 80 percent to 75 percent.

Discussions of these types of trade-offs have always been difficult. Politicians seek election by telling people what they will do for them. Advocates want attention to their issues, not someone else’s. Many foundations have agendas for getting resources to particular groups, whether businesses, children, or people in need. Even most governmental institutions devote attention to serving specific groups or areas of policy—Commerce, Labor, Housing, Education, Health—and avoid cross-cutting issues, such as who pays for healthcare or whether an additional outlay for housing could be spent better on education.

By analogy, the old saws for TV news that “If it bleeds, it leads” and “Controversy sells” extend to most modern news and social media outlets. A typical report or media post identifies a failure, a need, or a neglect. The storytellers often imply that the government should do something about the identified problem but then leave unstated where the resources might come from and the extent to which this particular item deserves preference.

At this point in our history—indeed, the history of many developed nations—I believe that we have come to a juncture where we must make a significant adjustment in our relative priorities. I don’t necessarily mean that past legislators set priorities incorrectly for their time, only that other opportunities and needs now deserve greater attention. I’ll give one example here: healthcare.

Healthcare has absorbed large shares of the real growth in government spending for decades now. National healthcare spending didn’t grow from 5 percent of GDP in 1960 to between 17 and 18 percent of GDP today without often absorbing, on average, 25 percent or more of all per capita growth in GDP. The government led the way by devoting even higher percentages of its growth in outlays and subsidies to healthcare—the new pie-filling largely made possible by economic growth. Today, the government covers around two-thirds of all healthcare spending. Not only has growth in government healthcare spending pre-empted many other government programs, but it focuses mainly on chronic and acute, not preventative, care. Preventative health efforts, adequately defined, include everything from excellent educational opportunities to physical exercise to a nurturing and healthful environment.

No one presents evidence that our health system, as currently designed, must automatically maintain its continuing priority for the same or a higher share of additional resources as the economy evolves. Properly defined to address preventative efforts, it may merit that status. Yet without better budget controls on government spending on healthcare, even that type of shift becomes nearly impossible.

There is no way that today’s priorities for government could have been determined efficiently and equitably by those largely dead legislators who put those requirements into the law. Of course, there is no guarantee that tomorrow’s legislators will do a good job if we take the shackles off them, but those shackles guarantee a mediocre, if not lousy, job.

I devote many column posts to identifying the relative winners and losers from government policy over recent decades. A forthcoming book, Abandoned, attempts to lay out those the government neglected most in recent decades. I don’t expect you to agree with each argument I have made or will make. Here, I only ask you to recognize three consequences of “pie” thinking: (1) when your share goes up, someone else’s goes down, even if the pie filling increases over time; (2) adjusting shares of the pie devoted to different efforts creates relative losers who may be aroused to opposition; (3) Congress cannot keep this simple mathematical constraint hidden much longer by running unsustainably massive deficits and setting up not-yet-identified members of future generations as the losers.

Of course, “pie” thinking means that if you want to do better for our children, the working class, Ukrainian democracy, or whatever else you believe to be a neglected priority, you may sometimes have to accept a smaller share of the government pie. That is unless you always identify yourself as the priority.