Wednesday, October 3, 2012

Read Stuff, You Should

Happy Birthday to David Obey, 74. Hope he's enjoying his retirement; he certainly earned it.

The good stuff:

1. If you haven't had enough of this already, Dylan Matthews gathers up the evidence on debate effects.

2. That Harrison Hickman thing yesterday (in the news yesterday, actually happened a while back) is going to be cited forever and ever, and often, by folks like me and John Sides, who did an item on it already.

3. Did you know this one? "We’ve actually achieved 70% of the discretionary spending cuts called for in the SB budget plan." I didn't; Jared Bernstein did.

4. Jonathan Chait on the continuing adventures of Eddie Haskell. He's not kind, but then again he doesn't actually call him Eddie Haskell, so there's that. See also Catherine Rampell.

5. Fiscal cliff hawks and doves, from Suzy Khimm. I guess it always has to be hawks and doves. Good item, but she leaves out the option of kicking the can, though. I'm with the doves.

6. I never watch bloggingheads...I just don't have the time, I guess. But for those who do enjoy the format, I suspect Conor Friedersdorf and Michael Cohen would be a very good one.


  1. Jonathan - I don't think your (and Jared Bernstein's ) 3rd point is accurate or fairly describes the reality of the situation.

    Any rational person is going to read what you (and he) wrote and think that that we'll be spending less in the future than we do today. And they will think that it is a done deal that can't be reconsidered or changed (at least without a major fight). But neither is true.

    SB projects spending of $1,043 billion in Appropriated Spending" for FY2013. As you know, these are the discretionary amounts that are not part of the mandatory (entitlement) programs and include security and non-security amounts. $1,051 is projected for FY2014 and similar increases are planned until 2022 when the projection is for $1,139 billion. That an increase of $96 billion or about 10% in ten years. Key word being increase. Of course, we are long used to a reduction in a planned rate of growth being a cut ruse, so I won't harp on that, but this goes further.

    First, I hope you will forgive me for not hanging the mission accomplished banner just yet despite announcements that a budget plan promises not to spend above level X in the future. Because every other past budget act has been violated - not just in spirit but also in fact - I'll hold my excitement until a few years of actual appropriations levels have been recorded. Otherwise, please see the doc fix for exactly what I expect to happen to actual spending once the back patting is over and the klieg lights have been put away. Past success in getting this behavior to stick is irrelevant, however; just assert that it is true and it is covered that way.

    Next, anytime I read a report (or blog entry) that goes out of its way to avoid talking about actual dollars and instead uses percentage of GDP, my BS detector goes on alert. Just like with labor force participation rates and unemployment, all I have to do is project a higher rate of GDP growth and magically even spending more can result in lower funding levels relative to the baseline projection. Again, past success in projecting GDP is never considered and this fiction is asserted as fact.

    Finally, Bernstein specifically goes out of his way to create the impression that all these "savings" have been arrived at through hard, thoughtful, "serious" sacrifices and that now we must focus on the "balance" of new revenue. The message is that the left and those who protect such spending have already conceded their pound of flesh. Yet he begins by noting that the status quo has only been able to "create recessionary cliffs, i.e., they’re good at creating problems, not solutions". Well, which is it? The only reason we arrived at last year's Budget Control Act was precisely because the House GOP created the "problem" of the debt ceiling line in the sand, just as they caused the "problem" of the spending sequester and as they have caused the "problem" of the fiscal cliff by not agreeing to any grand bargain that trades away their only true leverage.

    1. The objective, with regard to deficit reduction, isn't really to get spending "down." It's to bring spending and revenues into alignment. And, especially over the long term, share of GDP is more meaningful than specific dollar figures, which will have a different value when the time comes. The appropriate level of spending and revenues depends on what you expect government to accomplish. (I'll just assume we would differ on that and move on.) Even that goal is a long-term objective to be sought after the economy has recovered. Otherwise, you're just shooting yourself in the foot with deficit reduction leading to reduced economic activity and lower revenues. Along those lines, far from presenting the deficit reductions being hard fought, Jared Bernstein never said he thought achieving 70% of the Simpson-Bowles goals at this time was a even good idea. You seem to think Jared Bernstein is somehow being deceptive, but I suspect it's because you have internalized one particular set of policy objectives as the only natural goals worth pursuing when he is pursuing a different set.

    2. I appreciate your reply, Scott. And I too will accept that we have different goals and outcomes, and move on.

      Yet, I don't think my own bias clouds my assertion that Bernstein is being deceptive. He deliberately creates the impression that thoughtful and difficult choices have been made, with respect to spending levels, and that they were done from a position of responsible, good-will efforts toward reaching that goal. But since he has bashed the very and only mechanism that brought about this outcome, how can he not fairly be called deceptive? Plus, using knowingly-loaded terms like "spending cut" when he really means planned spending

      I agree that if your only concern is the deficit, then getting inflow and outflow to match is the sole objective. And if that's the case, then you do have two levers - revenue and expenses - to manipulate to get there. But it is also inarguable that just a single lever can affect both sides as well. We are all well aware that lowering high tax rates can result in greater economic activity and therefore greater tax revenue (the Laffer Curve). Before anyone protests, let me be clear that I don' t think the current rates are high enough today to have a tax reduction result in high revenue. There may be some dynamic effect that led to higher economic activity, but it wouldn't be enough to raise greater dollars.

      At the same time, I do think there is economic disruption occurring as a result of a loss of faith in our political and economic systems. We have seen too much bad policy making, in terms of process and outcomes, as well as corruption. And we've seen too many MF Global, Country-Wide Mortgage, and LIBOR scandals among the Wall Street elites who know that they themselves are too big to fail. That the feeling that everyone, everywhere is grabbing what they can, while they can, because think it's all about to implode. All that plus knowing that someday soon the piper will demand to be paid has created more than enough reason for individuals and businesses to scale back. I can't back this up with convincing data, but I am certain it is true nonetheless. It's the first time that I am aware of where the simple reality that people know our leaders have and will fail us is causing harm.

      Further, I fully understand that talking in absolute dollar terms isn't useful, over time, unless we also factor inflation and population changes. So a per capita figure that's been adjusted for inflation would be my preferred metric. Consider this: imagine tomorrow that some innovation or invention that would spur massive economic growth is revealed. That would certainly be reflected in GDP. But, would the needs or priorities of the government have changed? Yet, in GDP terms spending the same amount as we'd been spending would appear to be spending less. Is that really fair and does it reflect what is actually happening? Or imagine (it's not too hard, these days) a situation of economic contraction - and forget the added needs that result - where spending the exact same dollars would appear to be a spending boom. Is that really accurate?

      To me, federal spending or revenue relative to the GDP is useful to get a picture, over longer time periods, of what portion of the total economy is consumed or generated by the government. And when we compare those numbers to other similarly longer period numbers, we might get a sense of how that has changed. It really doesn't tell us much else.

      I'll end there so as to not become a bore.


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