Thursday, January 14, 2010

Liberal Bloggers Get Weird Deficit Pessimism

I haven't canvassed all the liberal bloggers, but so far Kevin Drum, Matt Yglesias, and Ezra Klein all seem to have concluded from this CBPP report that it's time to push the panic button with regard to the long-term deficit -- and that all we can expect from hitting that button is a big "out of order" response.  Probably printed in sloppy crayon, no doubt.  Basically, they all think the Congressional process is far too broken to expect anything to be done about the scary deficits CBPP projects.  The word "depressing" shows up a lot.

My response is: step away from the ledge.  Then go back to this useful post by Stan Collender...my feeling is that if you're more depressed about future deficits than Stan Collender, you need to rethink things.  Or, go to Brad DeLong's formula:
The three things people need to know about the deficit are:
  • In the long term--after 2020--we get health care spending under control or else.
  • In the medium term--between 2012 and 2020--we don't have a debt and deficit problem if congress sticks to PAYGO; we do if it doesn't.
  • In the short term--between now and 2012--our problem is not that our deficit is too large but that it is too small.

So how are things going for the medium and long term?  I'd have to say: pretty good.  On the medium term, deficit hawks are, in fact, trying to toughen paygo; more to the point, the Democrats decided, and up to this point have stuck to, doing the health care bill without deficit financing and with relatively few phony gimmicks (delaying implementation is a gimmick to get the ten-year "cost" down, not to mask the deficit effect).  On the long term, it's all about health care, and guess what?  The Democrats, again, decided to pass a bill that has a fair amount of cost control ideas, rather than simply increasing coverage (which, as some liberals seem to forget sometimes, is actually the core liberal reason to do health care reform).  Note, by the way, that the scary CBPP chart does not take into account any savings from health care reform.

The bad news for the deficit is all about the Republicans, who seem even less interested in deficit reduction now than they did when they were busy exploding it in the last decade -- really, the Medicare demagoguery from McCain and others during the Senate health care debate was pretty pathetic.  It's pretty clear that Democrats cannot expect Republican cover for any deficit cutting any time soon, especially if Republicans remain in the minority of both Houses of Congress.  On the other hand, Democrats did this before in the Clinton years without Republican help, and there are some advantages this time around: the biggest immediate move that Democrats can make is inaction, not action, on taxes, with the Bush cuts hitting their expiration dates.  Remember that it only takes 50 votes and the Veep, not 60, to do deficit cutting, since it's almost always done via reconciliation.  Except, of course, when it can be done through inaction, which usually takes even fewer votes.

For the rest...well, I agree with those who argue that the power of expanding coverage on health care is that it will eventually force cost controls.  Here's how it works.  If universal coverage -- if Ted Kennedy's "a right, not a privilege"  is eventually accepted as part of the American framework of government, then threats to it from higher costs will be a crisis.  And Nelson Polsby's definition of a crisis was "a period where everybody believes that something must be done."  Lots of things that seem improbable when there's no crisis (in the interview linked, Nelson was talking about the creation of the Department of Homeland Security) suddenly become possible when everybody believe that something must be done (although, granted, DHS wasn't exactly a smart "something").  So not only are there probably real cost savings in the bill that's about to be enacted, but the nature of the bill makes it more likely that health care costs will be tackled in the future.

In short: leave the panic button alone on this one.  Scary chart, but it's not really that scary a situation.

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