The Deficit Hawk Faction

In a message on his sidebar, Brad DeLong says:

Deficit Hawks with Our Wings Clipped, Brad DeLong: One thing that happened over the past six years--a thing that I had not recognized--was how much the policies of the Bush administration have destroyed the power of my own faction, the deficit hawk faction, within the Democratic Party. The failure of the Republican deficit hawks to put up even the most feeble of struggles against George W. Bush has led every other faction in the Democratic Party to conclude that we Democratic deficit hawks are saps: deluded enablers of the Republican leadership's right-wing class war.

Brad explains the deficit hawk view further in his review of a book by Robert Rubin from 2004. The deficit hawk, or Eisenhower Republican view as it's termed below is at odds with Paul Krugman's recent column Democrats and the Deficit (but see here too). Here's Brad in the American Prospect:

Bradford Delong, "Robert Rubin's Contested Legacy," The American Prospect vol. 15 no. 2, February 1, 2004: In an Uncertain World: Tough Choices From Wall Street to Washington By Robert Rubin and Jacob Weisberg, Random House, 448 pages...

In 1992 the incoming Clinton administration had, broadly speaking, two strategic options for domestic policy. The first was a double-or-nothing "social democracy" strategy. Federal spending at the time was running at 22 percent of gross domestic product, hardly changed from 1980. Contrary to conservative mythology, the Reagan revolution hadn't shrunk the government, but it had changed its shape: As a share of federal spending, domestic expenditures outside of the entitlement programs were down by one-third, while debt interest and military spending were up. Forecasts showed deficits continuing -- indeed, rising -- as far as the eye could see. If policy had stayed unchanged, the federal debt -- which had already risen from 26 percent of GDP in 1980 to 48 percent in 1992 -- would have continued climbing to 72 percent in 2000.

Bill Clinton could have said: Let the deficit problem be the responsibility of some future Republican administration. We'll pursue Democratic priorities while keeping the deficit constant, or maybe even allowing it to grow a bit in relation to the economy. Spend more to give every American good medical care (instead of using health-care reform for cost containment). Raise public investment in roads, bridges and other crumbling infrastructure. Expand social insurance to provide better benefits and retraining for workers who lose their jobs. Provide incentives -- such as a carbon tax -- for industry to rest lightly on the environment.

Some liberals will not forgive Clinton for failing to pursue this approach, but it was politically infeasible. In Congress, the Democrats had an organizational but not an ideological majority. Many centrist Democrats would not support a social-democratic program, as was evident in the spring of 1993, when Clinton's short-term economic stimulus program (which included money for infrastructure) went down to defeat.

The double-or-nothing strategy also carried serious economic risks. The long-term growth trend had slowed markedly in the late 1970s and stayed low throughout the 1980s. ... Governments that run large and persistent deficits find that their appetite for cash diverts spending that would otherwise flow into productive investment, and that investors get nervous and capital starts to flee the country. Low investment means stagnant productivity and wages, not just in a recession but over the entire business cycle. Would it have been good for the country if Clinton's inauguration had been followed by year after year of slow growth? And what would have been the chances of passing any Democratic legislative priorities if the macroeconomic news was never very good?

Faced with those considerations, Clinton rejected the social-democracy strategy in favor of the second possibility -- call it the "Eisenhower Republican" strategy. Make economic growth the first priority. Attempt to get the Federal Reserve to be dovish on interest rates in exchange for seriously reducing the deficit. Take other steps such as trade liberalization to try to boost growth. Reform rather than expand social insurance so that you can argue that taxpayers are getting good value for what they are buying. Hope that these policies will boost investment. And make the Clinton legacy a high-investment, high-productivity growth expansion. If all goes well, a decade of rapid growth and a resolution of the deficit will open up new possibilities for progressive policy.

This was the strategy that Bob Rubin executed, first as head of the National Economic Council and then as treasury secretary under Clinton. ...[A]nother critical factor in his success was the president himself. Clinton took policy seriously and was usually willing to be convinced that what was good policy would turn out to be good politics (or, at least, that this was a reasonable bet)...

But there is a bigger question. The Clinton-Rubin economic policies certainly contributed substantially to the economic boom of the 1990s, though economists will debate whether they deserve 20 percent, 40 percent or 60 percent of the credit. In the end, however, the resolution of the deficit did not widen the politically realizable possibilities -- at least not in the way we hoped. Rubin's success helped George W. Bush to return us to the budgetary ground zero of 1992 through enormous tax cuts for the $200,000-plus-a-year crowd, higher military spending, and pork for Republican legislators and favored companies such as Dick Cheney's Halliburton.

Might the social-democracy laissez-deficit strategy have been better for the country after all? Of course, neither Clinton nor Rubin could have foreseen the outcome of the 2000 election. And if they had bequeathed deficits rather than surpluses, would the current crew in power have been any less inclined to the reckless fiscal policies it is now pursuing? It's George W. Bush who has gone for a double-or-nothing strategy, and the country will someday pay the price.

I'd like to hear more from Brad on his perception of the costs and benefits of the "double-or-nothing or social democracy" strategy versus the "Eisenhower Republican" strategy given our present budget situation. What will we gain from abandoning the social democracy strategy and how do we preserve those gains into the future? Is the social democracy approach as politically infeasible today as it was then?

As Brad notes, restoring Paygo is supported by those in the social democracy camp, and by itself this would shave around $300 billion off the deficit. The question is whether to go even further and move into Eisenhower Republican territory. Though the choice depends upon how the deficit would be closed, I am not convinced that the benefits of doing so outweigh the costs.

Comments

[pgl]

From a member of Brad's camp, let me toss out: (1) the deficit should not be closed by a large increase in employment taxes; and (2) it should not be closed by large reduction in Social Security benefits - which of course is a backdoor employment tax increase. So put let the GOP on income tax increases and other tax increases and we can talk about spending cuts as in: (a) defense spending cuts; (b) reductions in pork barrel spending, and (c) dare I say this - scaling back on Bush's bloated prescription drug benefit program.

[maria]

Might as well face it: both the administration and the Congress inherently are (or have become) spending machines. That is their essence. So unless it threatens immediate bankruptcy both are going to spend fast and furiously. Surpluses are unnatural and can't last. Prudence is unnatural and won't prevail. Spend, spend, spend, and then spend some more is the overwhelming dynamic of the US political system and it cannot be stopped.

[anne]

Brad DeLong:

"The failure of the Republican deficit hawks to put up even the most feeble of struggles against George W. Bush has led every other faction in the Democratic Party to conclude that we Democratic deficit hawks are saps...."

The problem the Administration presented was and is simple. Raising taxes after Bill Clinton became President, even though the tax increase was small and necessary and successful in allowing for a vibrant economy, led to a Republican Congress. A tax increase in California led to the recall of a Democratic governor and to the Terminator terminating. To be successful politically Democrats in Congress must not try to raise taxes, especially so since George Bush will prevent tax increases.

That leaves spending, but this is a time of war and occupation however insane and military spending on Iraq will not be cut. There is then no room for spending cuts unless we are willing to harm Americans at home and Democrats in Congress will and should surely be helping Americans at home.

[anne]

PGL, phooey, phooey, phooey. The idea of cutting the Medicare drug benefit program is absurd and pernicious and would be rightfully politically self-destructive for Democrats. Phooey. PGL simply cannot understand why the Terminator is governor of California and PGL is not. Get it.

Want cuts? Then leave Iraq immediately and cut $14 billion a month for the destructive insanity.

No fear though, a Democratic Congress will not be cutting Medicare. Guess what, our grandparents or parents really do have a right to medical care even when they need the care most. Get it?

[bakho]

If we look at where spending is today, it is still well below the Reagan 22% of GDP. Spending is not out of whack compared to any of the post-Medicare/Medicaid budgets. Spending on Medicare/Medicaid has almost doubled between Reagan and today. The problem is not with the spending side of the budget, other than some re-allocation from defense to domestic investments. The big problem is with the revenue side of the budget. Revenue from individual income taxes have tanked under Bush.

Going forward, we need to let the Bush tax cuts expire reallocate and end corruption. We could cut $10 Billion from missile defense tomorrow and put it toward energy alternatives and be far better off. Reallocations within DOE could better benefit civilian technology than merely driving expensive knew DOD acquisitions. Reallocating the no-bid Katrina money could get more bang for the buck. Repealing NCLB testing and spending the money to broadband all the schools instead would accomplish a lot. Getting medical spending under control would be a huge plus.

It would also be a good idea to write legisilation that would collect hefty fines from contractors that failed to deliver, especially on no-bids. Legislation defining political contributions by corporations with government contracts as "kickbacks" would also be useful.

If the Dems really want to drive home a point about the Bush revenue shortfall, they would tie a tax increase on top incomes to the Iraq War Supplemental.

[anne]

Bakho:

"If we look at where spending is today, it is still well below the Reagan 22% of GDP. Spending is not out of whack compared to any of the post-Medicare/Medicaid budgets. Spending on Medicare/Medicaid has almost doubled between Reagan and today. The problem is not with the spending side of the budget, other than some re-allocation from defense to domestic investments. The big problem is with the revenue side of the budget."

Agreed; and when we note spending on Medicare/Medicaid has almost doubled since the Reagan Presidency, that would mean a doubling in 18 years including the drug benefit program for Medicare which is quite reasonable in terms of the economic growth of these last 18 years.

However, Congressional Democrats should not and cannot and will not raise taxes. We won't be fooled again.

[Ken Houghton]

I've been metaphorically screaming the PAYGO portion of Krugman's piece at those who ignored it (not the least of which being angrybear's cactus).

It's a sad day, though, when one can declare one's self a "deficit hawk" simply by declaring solely "Do no harm." (If that be so, I would qualify as a hawkand so would Max.)

anne - pgl is correct to a point. FIXing Part D would be rather easy in principle. Eliminating it is probably politically unacceptable (though not because it benefits people), but simply allowing the government to "compete" would save some decent dollars.

I ask here what I asked at angrybear: What do you do with the savings? If you save "cut the deficit" (which is presumed to be Brad DeLong's answer), then you haven't been paying attention. And that is why the deficit hawks are marginalized. It's a standard Nash Equilibrium, when dealing with an irrational but predictable partner.

[STS]

bakho:

"...tie a tax increase on top incomes to the Iraq War Supplemental"

I second this notion. We should be calling and emailing congress to lobby for it. Back when Kerry got "swiftboated" over "the 87 billion" he should have turned around and said "Bush first proposed this spending, then threatened to veto it. Why? Because he didn't want his 'base' -- you know, 'the haves and have mores' -- to have to chip in for it."

It's still not to late to make the obvious point that the rich are not sacrificing in the least for Mr. Bush's Folly (aka 'war in iraq').

I think the Democratic response to Mr. Bush's upcoming "sacrifice" speech would be a fine time to start making this point loudly and clearly.

[ig]

just playing devil's advocate here but what has it hurt? Have deficts caused inflation?....not that i can see. The dollar is weaker but so what. we can still attract plenty of investment.

was cheney right? do deficits matter anymore. as I see it the deficit hasnt hurt us one bit so maybe the deficit hawks arent relevant

[anne]

Ken Houghton:

Agreed generally, and nicely argued.

There is every reason to look to allowing for Medicare negotiated drug prices to limit cost increases for prescriptions, but cutting Medicare as cutting Social Security would be a betrayal of Democratic Party principles and would by self-destructive for Congressional Democrats but happily will not be possible. Gaining the right to drug coverage in Medicare was long in coming and I could not be happier with the gain, but more important by far is that those who receive Medicare are happy for the coverage even through the problems with administration. Now, to improve and hopefully simplify administration and look to limiting cost increases.

[2slugbaits]

Anne,
I don't think the question is whether or not spending is too high, too low, or just right. I don't think you can talk about spending levels in some absolute sense as being the right level. The issue is the sustainability of the gap between revenues and expenditures. As a famous man once said, "To spend is to tax." Somehow, someway that gap between revenues and expenditures has to be covered. We can either cover it with explicit taxes or we can cover it with more borrowing, which will eventually mean higher interest rates and slower growth. Won't voters punish politicians for higher interest rates and sluggish growth just as surely as they would higher tax rates?

I think it's easy to overlearn the lesson of the Democrat's losses in 1994. People were more upset about corruption and social issues than they were tax hikes.

Finally, let's keep in mind that we do not need to bring the total deficit to zero; we only need to bring the primary deficit (i.e., total deficit less interest costs) down to zero.

[anne]

IG:

Playing with deficit questions is important; for, along with Warren Buffett, I do not find the domestic deficit as such fearsome from the vantage of inflation or long term interest rates, or the value of the dollar. I find what the deficit is buying a distinct problem, and there is the prospect of the deficit increasing faster than we can grow which we must be cautious about, but the deficit is just not about to gobble up Kansas.

What Republicans have chosen to buy with the deficit however is a tragedy that will haunt us for many years. Buying a needless war and more needless occupation, is nightmarish and this is what Republicans have bought for us.

[anne]

Slug:

"The issue is the sustainability of the gap between revenues and expenditures."

Agreed; though we need to look to the quality of spending, the quality and equity of fiscal policy, which is herein implied.

[bakho]

The CBO has a very good graph of where we have been on spending and revenue and where we are going:

http://www.cbo.gov/ftpdocs/74xx/doc7492/08-17-BudgetUpdate.pdf

Note that the spending and revenue lines close once the Bush tax cuts expire.

As for the problems of deficit spending, CBO estimates that interest on the debt will be $1.4 TRILLION over the next 5 years (07-2011) and $3 Trillion over the next ten years.

IG, Ask yourself, is there a better way to spend $3 Trillion than making intererst payments to wealthy bond holders and the Chinese? That is where deficit spending takes us.

[anne]

Actually, middle class households are creditors who earn significant amounts of interest income but who are tax disadvantaged because bond income is taxed at income tax rates rather than 15% as dividend and capital gain income. Middle class households own bonds, lots of bonds.

But, there is every reason to ask and grumble about what we are buying with debt. I am not asking for more debt, but I am asking that important domestic needs not be sacrificed and that Democrats not be fooled again in pushing for tax increases when such increases will be stopped by the President and the push turned against Democrats.

The fiscal lesson for Democrats should be California, and the weaknesses and strengths of the approach of the Terminator.

[Emmanuel]

Anne: do not be so dismissive of PGL, the Angry Bear. I agree with him--as most of us probably would--that having no negotiating power over bulk discounts from drugmakers is a terrible way to spend taxpayers' money. It defeats the purpose of centralized purchasing.

Never mistake spending a lot with spending wisely. It's not terribly complicated, for generally -

Good legislation: social benefits > social costs
Poor legislation: social benefits < social costs

Medicare as it stands is in the latter category. Left-of-center deficit hawks aren't against public spending per se, it's just that they want more proof that money is well spent. Such is not the case with Bush's Medicare boondoggle.

[anne]

Emmanuel; I agree with you and possibly I am being too tough, but the need is not to cut the Medicare drug benefit as such but to simplify the program if at all possible and to limit the cost increases that have followed and likely will continue to follow from an absence of bulk purchaser negotiation over drug prices.

We might even use the Medicare drug benefit as a "model" for a broader coverage of catastrophic health care needs. When Wal-Mart can use negotiation to offer perscriptions of generic drugs for $4 a month, there is more to be gained from negotiation.

says...

bakho said: "Note that the spending and revenue lines close once the Bush tax cuts expire."

Yes, there is light at the end of the tunnel. In fact, it will take positive action (not easy to do with gridlock) to make Bush's tax cuts permanent. And I think the market has already taken this into account, which might be one reason why long term interest rates aren't as high as one might have expected. Bondholders are fairly confident that there is no reason to believe the tax cuts will be made permanent, which will go a long way towards closing the fiscal gap. So to some extent the problem fixes itself. Except....the CBO numbers also assume that the AMT is never adjusted and that is one tax hike that Congress will have to address, so the revenue picture won't be quite as rosy as the CBO projections would suggest. But even when the tax cuts expire, the effect will be the same as a deliberate tax hike. And it is likely to be a fairly sudden jerk, so Congress might have to figure out a way to allow the tax cuts to expire gradually.

Still, there is always the concern that once the budget gets puts back on a (more or less) sustainable path, the GOP will come back like another bad teen slasher movie and cut taxes for the rich. I guess that's always a risk, but we can always hope for gridlock. If the Democrats had retained control of only one lever of government, then we would not be in nearly the mess we're in today.

[Lee A. Arnold]

Brad DeLong: "The failure of the Republican deficit hawks to put up even the most feeble of struggles against George W. Bush has led every other faction in the Democratic Party to conclude that we Democratic deficit hawks are saps...."

If so, then those other factions are saps, because if the Democratic Party doesn't look like it is controlling spending, it will be turfed-out in another 6 or 8 years. They should think about long-term politics, and do the following instead:

The Democrats should reduce the deficit each year by a very tiny amount -- say, ten dollars ($10.) Because this question is entirely political. The voters are worried about job loss to globalization, and paying the bills. They don't like the fact that the US is borrowing without a plan, and they are frightened of swings in the currency, though these can be harmless or even salutary.

So to remain in political control for a very long time, and ensure that they can do whatever else they want to, the Democrats must effect a semblance of responsibility. And it should be humorous. They should reduce the deficit each year by a very tiny amount, ten dollars. Every year. I like ten dollars because it's a nice little round figure and I can remember it. And they should make a very big noise about it, and make jokes about the Republicans.

Then the Democrats should spend the budget on whatever the hell they want.

They should make sure the Bushian tax robbery goes off to its deserved sunset, on the principle that it changed the total tax burden AFTER raising payroll taxes to save Social Security. That was one of the stupidest moves in the history of US politics.

And reform the medical system.

After a few years of all of that: if they still have to, the Democrats can raise everybody's taxes by a miniscule amount, say a quarter of a percent per year. Again, this is strictly about perception. No one will notice the bite, and the long-term charts will look a lot better.

[ig]

Ok Anne, lets play devils advocate again.

The Tax cuts were biased towards those with higher ncomes. Those more productive with capital. Wont they do the best job using capx to create a foundation for future growth?

As far as Iraq goes. Regardless of what bumper sticker slogan we use we know the reason we are there. TotalFina Elf had the inside track once the UN sanctions were lifted in say 2001. It was obvious that some Euro based corporation would end up with control if Saddam were still in power. How fair is that.

It was the US that liberated Kuwait and faced down the Soviet Empire. We paid alot of money for the military we have for just such a purpose. Why should we allow the EU to push their agenda in the Middle East?

[anne]

"Bondholders are fairly confident that there is no reason to believe the tax cuts will be made permanent, which will go a long way towards closing the fiscal gap."

Interesting conjecture, though I would argue that bondholders simply are not worried about inflation no matter the deficit and no matter tax structure changes which are strike me as too difficult to predict. Interesting idea.

[anne]

There are conjectures and there is foolishness, and assuming there should be no taxes on the wealthiest because they are supposed to be the most productive is simply foolishness all around though used for a rationale on current tax structure.

The President has made precisely and repeatedly clear why we are in Iraq, and there is every reason to agree that those reasons are why we are in Iraq however much we may disagree that the reasons are at all rationale and wish accordingly we could leave Iraq immediately.

[ig]

Nonsense, The growth and balanced budgets of the 90's were a result of shifting the tax burden from productive capital to labor. That was the whole point of the Supply-Side approach and the Kemp Roth Tax cuts.

terrorism? spread freedom and democracy? WMD?

my understanding is that even with the trillions we spent on nuclear deterents we were still going to be attacked by puny and broken Iraq? I dont believe that and dont think for a moment that this administration believed that either.

[Ken Houghton]

ig - Clearly, the Devil needs a better advocate. Burning some straw:

It's easy to be seen as "more productive with capital" when you are taxed at 45% or less of the rate of those who receive income (15% max v. 33%).

That said, if I produce a $1B company, the idea that my heirs (who have done no such thing) should be exempted from having to continue my productivity is antithetical to your premise. (Look at the destruction, very little of which could be called "creative" except in an accounting sense, from Prescott to George W. Bush.)

The liberation of Kuwait (as George H. W. Bush and, later, Brent Scowcroft noted as one of the primary reasons for not continuing into Iraq at the time) was a U.N.-led effort with a true multilateral force. In short, a consensus liberation with a specific mandate. (Which is what Bush noted: the mandate was "free Kuwait," not invade Iraq which would have required either going it alone or a new force.)

It was that "MLF" (showing my appreciation of Tom Lehrer more than my age, though a touch of both, to be certain) which "liberated Kuwait." And it has largely been the EU that has paid for the assimilation of the former Soviet satellites and Republics (to the short-term detriment of their growth rates, obviously).

(As an aside, I agree with you that denominating oil prices in Euros would impact the USDmany others, including I believe Mark T., appear to disagreethe potential loss of premium is dwarfed by the destruction to date, including the lost Human Capital Annuity, foreign and domestic. From a risk-reward standpoint, it's a no-brainer that the course chosen produces a lower general welfare than waiting would have.)

[IG]

"That said, if I produce a $1B company, the idea that my heirs (who have done no such thing) should be exempted from having to continue my productivity is antithetical to your premise."

The estate tax was but a small part of the Reagan package. The balance was the reduction in rates on prudent investment. It was that investment that yielded the productivity gains. The productivity gains that hedged inflationary pressures.

[Lee A. Arnold]

ig: "The Tax cuts were biased towards those with higher ncomes. Those more productive with capital. Wont they do the best job using capx to create a foundation for future growth?"

----Not necessarily and never entirely. And why is this still taught in Wall Street Op-Ed 101?

There are NO political nor economic downsides to sunsetting the Bush income tax cuts to the wealthiest. To correct the record:

(1) Except for a few periods like the Great Depression, there has never been a lack of capital for investment for good ideas in the United States.

(2) Productivity is unlikely to be penalized. The growth of the 90's appears to have been from the productivity gains which were almost entirely technological-innovation-based, i.e. the introduction of microcomputers. Fiscal policy, at any historically recent tax rate, has a negligible role in aiding this intellectual leap. Or if anything, the reduced smart investment in education, since the Reagan intellectual torpor, may have hindered it from growing further.

(3) In the current "business cycle," if the tax cuts had relieved poor people instead, well then, they would have spent it, and the new business profits would have boosted investment anyway: a more inclusive, some would argue more proper, sequence.

As it is now, with the Bush tax cuts, if you add all federal, state and local taxes, the total tax burden is very close to FLAT, down to the around the top of the second quintile. Are we are going to run a de facto Nordic model? Then we should likewise have universal social and medical coverage. In any case we need much better policy.

(4) There is much growth to be gotten from the other half of economics: Organization itself.

The individual preferences for this half are covered, rather completely, in Adam Smith's "Theory of Moral Sentiments" and the subject has now gone into both institutional economics and the "missing residual" in growth theory.

All private and public organization (not only entrepreneurial organization, but also the mere organization of matter, as well as organization in private clubs or by public choice in government) -- ALL organization, every institution, reduces somebody's costs. It reduces information costs, reduces transaction costs, sometimes even reduces production costs (Douglass North called production costs "transformation" costs -- and in the organization of material matter, such as in a hand tool, I would argue that this "reduction" appears to be achieved by the increase of something like "mechanical advantage.")

That is abstractly part of the the definition of growth, at almost any level of nature and society.

As for the Qualitative changes in growth (invention and innovation, differentiation,) these are caused by more FREEDOM. Which again is aided by reducing costs, thereby freeing-up more space and time.

Of course, government spending is subject to great evils, and can reduce individual freedom. Yet there is no question that society-wide topics may find huge savings in better organization.

So it may be wisest to prefer the advancement of public institutions which are narrowly focused and targeted (such as Social Security, a deceptively simple program.) Narrowly-targeted institutions are easy to correct and defend, and they provide simple points of understanding and planning.

ig: "Why should we allow the EU to push their agenda in the Middle East?"

----Because they are our allies, and it is a lot better than allowing our non-allies to succeed entirely. We need that, plus a functioning market for the oil -- while we wean ourselves from the stuff, and crank-down the climate withal.

[bakho]

Especially in a global economy, capital knows no borders. How much of the tax cuts for wealth investors went to build MFG in China? To stimulate a local economy, put money in the hands of people who will spend it locally. Money trickles up much faster than it trickles down so the wealthy get theirs.

[Ig]

The dollars leaving for investment in lower cost markets reduce costs and prices. This yields gains for stock and stake holders who in turn invest that capital into more productive efforts.

and yes the productivity of the 90's was due to tech innovation. Innovation from the investment of capital. Incentives like the depreciation acceleration encouraged capital investment. That investment is entirely responsible for the productivity gains of the 90's.

[Bruce Webb]

In Ig's world workers get no credit for learning to use those tech innovations, or in fact for creating new ways to use them. Yep all you in house programmers and coders are simply parts. Your talent is inherently worthless, only investors bring value to the table.

Ig taking Marx's Labor Theory and simply inverting it doesn't guarantee a better product. It just makes you a candidate for an Ig-Nobel

[pgl]

Anne - I was not saying we should eliminate the prescription drug benefit. I was saying we should trim the pork that goes to Big Pharma. And yes - someone will have to pay more in taxes to pay for this. The Republicans will never admit to this - I just did (see if folks can recall which Democratic candidate for the White House had the integrity to say that). Lord knows - if we Democrats start shooting at each other like this, we'll look like a bunch of feces throwing GOP monkeys!

[pgl]

Ken Houghton brings up Nash equilibrium, which is one way of modeling what Krugman recently wrote. Anne brings up the example of CAL's replacement governor. I'll admit we fiscally responsible CAL Democrats are losing the game to ARNOLD. Yes, we Californians do need to hire our own John Nash to play the game more smartly. As Reagan used to do (rather than say), ARNOLD just "SPENDS & SPENDS and BORROWS & BORROWS).

[anne]

PGL -

Actually, I am find no reason not to have Democrats argue in coming to decisions on important political matters. Republican shows of unity have long struck me as ominous, and ultimately led to Democratic election success by preventing flexibility and adaptability to voter's needs and wishes. Also, you are self-reflective enough to think through arguments, which is pleasing. Now, let me be self-reflective enough before I grumble again, though grumbling can be fun.

[anne]

About the years of Ronald Reagan, economic growth was about half that during the years of Bill Clinton. Productivity growth was half, long term interest rates were as much as double as late as 1987, unemployment was higher, job creation relatively lower, the deficit increased enough to force a tax increase in the second Reagan term.

Nonetheless the economy strengthened through the Reagan years, as through the Clinton years. During the Reagan years the economy seemingly became more adaptable, more shock resistant and, I would argue, we are more adaptable still.

[yan]

Are we really naive enough to think that presidential policies are directly responsible for economic circumstances during strictly the terms of those presidents? Are there no lag effects in the way the economy responds to policy changes? Are there no independent productivity enhancements or economic cycles that have nothing to do with presidential policy? Are there no exogenous forces that may affect the strength of the dollar, global and national interest rates, credit spreads, stock market valuations and housing prices? Arguments that give credit to or blame specific presidents for the entirety of economic developments exaggerate the level of causality between the powers of the administration and the national economy.

[bakho]

The Voodoo Economics / Fiscal Irresponsibility / Borrow and Spend Faction:

Bush Calls on Democrats to Work With Him

Bush said he would submit a budget in February that would make tax cuts permanent and lead to a balanced budget by 2012 (LOL, How dumb is too dumb?), which he contended would put the country in a better position to tackle the challenge of changing the Social Security (DOA), Medicare (most recent Bush SNAFU) and Medicaid programs. He also said he would offer his own plan for dealing with pork-barrel spending by Congress and ask for a line-item veto (No pony for Bush).

"We now have the opportunity to build a bipartisan consensus to fight and win the war," he wrote (Bush already lost that opportunity and the war to boot).

In recent weeks, Bush has signaled a willingness to go along with a Democratic priority for raising the minimum wage, if it is accompanied by tax and regulatory relief for small businesses (Just steamroll him on Min Wage. The increase is popular and Bush does not dare veto).

Bush defintion of bipartisan is having Democrats lick his boots. That's why Bush supports the "bipartisan" Joe Lieberman.

[anne]

Oh, and here was what was written:

"So...we can talk about spending cuts as in: (a) defense spending cuts; (b) reductions in pork barrel spending, and (c) dare I say this - scaling back on Bush's bloated prescription drug benefit program."

Yes; we can talk about defense spending cuts, pork barrel spending cuts will make little difference and what is pork to Republicans will be social benefit programs to Democrats, while the Medicare drug benefit as a benefit is not bloated and should not be cut but only made more efficient while drug price increases are limited by various negotiations.