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Thursday, March 24, 2011

Former CEA Chairs and the Unsustainable Budget Deficit

I was going to let this go, but since one of the members of this list sent an email promoting it, let me offer a few comments:

Unsustainable budget threatens U.S., by 10 ex-chairs of the president's Council of Economic Advisers, Politico: ... As former chairmen and chairwomen of the Council of Economic Advisers, who have served in Republican and Democratic administrations, we urge that the Bowles-Simpson report, “The Moment of Truth,” be the starting point of an active legislative process that involves intense negotiations between both parties.
There are many issues on which we don’t agree. Yet we find ourselves in remarkable unanimity about the long-run federal budget deficit: It is a severe threat that calls for serious and prompt attention. ...
It is tempting to act as if the long-run budget imbalance could be fixed by just cutting wasteful government spending or raising taxes on the wealthy. But the facts belie such easy answers. ...
To be sure, we don’t all support every proposal here. Each one of us could probably come up with a deficit reduction plan we like better. Some of us already have. Many of us might prefer one of the comprehensive alternative proposals offered in recent months.
Yet we all strongly support prompt consideration of the commission’s proposals. The unsustainable long-run budget outlook is a growing threat to our well-being. Further stalemate and inaction would be irresponsible.
We know the measures to deal with the long-run deficit are politically difficult. The only way to accomplish them is for members of both parties to accept the political risks together. That is what the Republicans and Democrats on the commission who voted for the bipartisan proposal did.
We urge Congress and the president to do the same.
Martin N. Baily
Martin S. Feldstein
R. Glenn Hubbard
Edward P. Lazear
N. Gregory Mankiw
Christina D. Romer
Harvey S. Rosen
Charles L. Schultze
Laura D. Tyson
Murray L. Weidenbaum

Reading the names on the list, and noting the staunch opposition to tax increases by some, this came to mind:

Back in 2000, the U.S. government's long-term budget was out of balance--although not by all that much. The government had, you see, made promises--very popular promises--for Medicare, Medicaid, and Social Security without proposing sufficient funding streams to pay for those promises. So back in 2000, looking forward, we had a choice: raise taxes, or "bend the curve" by cutting the growth of spending.
Instead of doing either of these, we elected George W. Bush. Two wars. A big (and ill-advised) defense buildup that is very unsuited to protecting us from Al Qaeda and company. A huge unfunded expansion of Medicare. Plans for the unfunded expansion of Social Security that came to nothing. However, instead of raising taxes George W. Bush reduced them.
This simply does not work. As Milton Friedman liked to say, to spend is to tax. If the government spends somebody will pay for it. And if you don't levy the taxes to pay for it now all that means is that the person who owes the taxes does not know it yet. ...
Taxes are going up over the next decade--barring cuts of 1/3 to Medicare, etc. They can either go up smartly or we can pretend they don't have to go up, in which case they go up stupidly. The argument for small government was lost long ago, and was lost again and anew in the past decade with Medicare Part D and the wars of George W. Bush.

The time to stand up to the budget busting was when it happened, and when members of the list had the power to affect policy, not many years later in an article at Politico. Many on the list were either part of the decision making team in the 2000s that opened the hole in the budget, or supported what the team did. I suppose it's possible to argue things were different in 2000 -- there was a wide expectation that budget surpluses would be the "problem" at that time. But if the forecasts by members of the list were so bad then -- and they were -- why should we listen now?

The long-run budget problem does need to be addressed, but the standing of some on the list to make this claim can certainly be called into question.

    Posted by on Thursday, March 24, 2011 at 11:07 AM in Budget Deficit, Economics, Politics | Permalink  Comments (45)


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