Has the Fire in the Hair of Deficit Hysterions Been Extinguished?

January 25th, 2013 at 1:11 pm

As Paul K writes this AM, it does seem to be the case that the debt crisis mongers are getting less love and attention these days.  I was on TV the other day with a Republican congressman and when he launched into his talking points on the crushing Greco-style crisis we face, his words just seemed to land with a thud. 

Paul ticks off a number of good reasons as to why we may be—and that’s “may,” not “are”—turning a corner on this, but I’d add a few more.

First, while I quiver to think that perhaps facts may matter once again, the facts are that we’re a good portion of the way to the first goal of actual fiscal rectitude: get the debt growing less quickly than the GDP.  The quite excellent set of tables here from Sen Patty Murray’s budget document presents the facts with great clarity.  There’s been $2.4 trillion of deficit savings over ten years so far (table 2), and according to our chief hair-on-fire extinguisher at CBPP, Richard Kogan, it will take another $1.4 trillion—about 0.6% of GDP over the next decade—to stabilize the debt as a share of GDP.

[An aside: the Murray budget memo was the best piece of budget analysis I’ve seen coming out of the Congress in years.  Like I said, it gives one hope that factual analysis may one day rise again in that benighted institution.  It also leads me to be quite hopeful that the Senate’s budget will be an important and venerable counterbalance to the Ryan-type slash and burn budgets we’ve seen from the House side.]

I should also note that Richard’s piece on that $1.4t has been #1 for downloads from our site for a while now.  So I submit that another factor in play here is…wait for it…the factual reality that there is no budget crisis.

To be clear, that doesn’t mean getting from here to stabilization will be a cakewalk.  Fiscal politics remain dysfunctional.  But the facts belie the crisis narrative.

The second recent development that gives me hope here is CA.  You can’t open your paper these days without reading about California’s fiscal progress.  A colleague from out there was just bragging to me about their fiscal rectitude, which I told him feels a little like Madonna lecturing you on chastity.

But I take the point.  In fact, from where I sit, it looks like Gov. Brown did something I think all pols need to do:  explained to the electorate that if you want service X (education, in this case), it’s going to mean raising revenues Y.

And it worked.  I even recall seeing former Romney economic adviser Glenn Hubbard making the same point the other day, something to the effect that people have to decide if they’re willing to pay for the services they want.

I know that’s simplistic and leaves out a lot.  I know that we will have national disagreements about that question, though it’s fair to say that the election certainly provided an answer pointing more in, say, my direction then Glenn’s.  But if my analysis of what happened out there is even partly correct, I think it’s an important step toward realism, sanity, and fact-based analysis, and away from ideologically driven crisis-mongering.


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7 comments in reply to "Has the Fire in the Hair of Deficit Hysterions Been Extinguished?"

  1. foosion says:

    As many have noted, the main point of deficit hysteria is cutting programs which benefit the middle class and poor in order to cut taxes and otherwise further enriching the wealthy. Don’t expect the usual suspects to give up on this agenda just because facts are getting in the way.

    We continue to be plagued by high unemployment and slow growth, which are exacerbated by cuts to current spending. We can grow the economy by spending more today, which will increase GDP and decrease spending on unemployment benefits, etc., or we can continue a counter-productive focus on the deficit.

    • Tyler Healey says:

      Extremely well-stated, foosion.

      The very purpose of fiscal conservatism is to crush the non-aristocrats into permanent servitude. This is why the payroll tax still exists and the federal minimum wage is less than 10 dollars per hour.

  2. Pablo says:

    Stabilization is a bad objective. It leads us with no cushion for higher interest rates or another recession. The real issue is not short term spending, as you correctly point out. The real issue is entitlement reform which the President is avoiding.

    • perplexed says:

      Yes, and once we start measuring “entitlements” correctly by including monopoly profits, government welfare for corporations, and other forms of rents, it will become quite clear how we need to go about “fixing our entitlement problems.”

      What gets measured gets done, and conversely, what doesn’t get measured gets ignored. Where do we go to find the rents/GDP historical graphs?

  3. Rima Regas says:

    As I pointed out in my comments to PK’s column, now is hardly the time to relax.

    We have no Filibuster reform.
    Louisiana and other states are doing away with income tax in favor of higher sales taxes.
    New poll data show that people still think of the national budget as they do a household budget and while they don’t want cuts to the big three, they do express a wish to deal with the deficit before growth. This is a huge worry.
    Unemployment is still really high and will remain that way without another big stimulus
    The Congressional GOP is still in obstruction mode. They’ve gone from in-your-face defiance to obstructionism by postponement. Either way, they get their way.

    Now, more than ever is the time for you, PK, Stiglitz, and Reich to blanket the airwaves with teach-ins. 2014 will be here sooner than we realize and we need to get the GOP out.

    RE: California. Unemployment is still really high and there isn’t much hiring in SoCal at all since the summer. NorCal is doing a bit better. I have a lot of questions about Brown’s budget magix.

  4. R. Nemo says:

    Yes, California has slain the Jarvis/Reagan curse. Next we go after the sacred cow of Prop. 13 where billions of revenue await. Corporate property taxes and education taxes. It will happen now that the Repugs are irrelevant in CA.

    We will also expand medical and restore benefits cut by Arnold the barbarian.

    America’s problems are easy to fix. We just need the GOP to get out of the way. They are obsolete. Simple as that. They should all go back to raising hogs…

  5. readerOfTeaLeaves says:

    I doubt the GOP will be able to ‘think different’ very rapidly, but after reading Sen Murray’s budget document, I’d point out a few things:

    On page 11, the document mentions ‘billions for oil and gas tax breaks’, but doesn’t specify a dollar amount. What’s the relationship of that total to what is spent on Medicare? On Pell Grants? That kind of compare-and-contrast is missing.

    Also on page 11, the document mentions tens of billions lost to tax havens; however, this amount is not specified. Watching Romney last year, I found it *mighty* interesting that he opted to risk losing the election *rather than* make his full tax returns public. Romney’s campaign was a great chance to start educating more of the public about this problem. (One caveat: British PM Cameron appears to be smacking Starbuck’s around as a tax cheat in the UK; this whole topic of ‘transfer pricing’ is about as clear as… well, thick mud, to most of my acquaintance. But I hate to see Starbuck’s get knocked around, as it does seem to treat its employees quite well.)

    Also on page 11, a mention of $3 billion a year in corporate jet tax loopholes. How many Pell Grants does that translate to? How many Head Start programs could that amount fund?

    I suppose my point is that the ‘trade offs’ are still very abstract.
    I suspect that most people would favor educating kids over allowing people like Romney to concentrate wealth via tax havens, but I think the specific, comparisons are still too blurry and not ‘real’ enough for most people. In other words, the choices are still not clear.

    But if someone told me that the amount siphoned off in tax loopholes for corporate jets could instead fund early childhood programs in NY, NJ, NC, SC, and GA, well… then it would clarify the decisions more starkly.