Some lynx: Unions, CBO’s new baseline, the Bernstein Rule…

April 9th, 2018 at 7:49 pm

The teachers provide us with a teaching moment, over at WaPo. Their actions pose a stark reminder of the essential need for a strong, organized movement to push back on the forces promoting inequality, non-representative government, trickle down tax policy, and more.

CBO released their updated “baseline,” or estimate of the US gov’t’s fiscal outlook. If you like red ink, you’re in biz. Instead of deficits between 3 and 4% of GDP over the next few years, we’re looking at deficits of 4-5%.

As I’ve written in many places, when you’re closing in on full employment, you want your deficit/GDP to come down and your debt/GDP to stabilize and then fall. It’s not that I worry about “crowd out” so much–public borrowing hasn’t crowded out private borrowing for a long time, as evidenced by low, stable interest rates (rates are climbing off the mat a bit now, as I’d expect at this stage of the expansion).

It’s a) there’s a recession out there somewhere are we lack the perceived fiscal space to deal with it, and b) the larger point that this is all part and parcel of the strategy to starve the Treasury of revenues so as to force entitlement cuts.

Which brings me to this oped by a group of former Democratic chairs of the president’s CEA. It’s a perfectly reasonable call for a balanced approach to meeting our fiscal challenges, and, again, consistent with my view that as we close in on full employment, the deficit should move toward primary balance (another way of saying debt/GDP stabilization).

But two things from this piece, which is a critical response to an earlier oped by a “group of distinguished economists from the Hoover Institution.”

First, I didn’t realize that the Hoover’ites argued that the “entitlements are the sole cause of the problem, while the budget-busting tax bill that was passed last year is described as a ‘good first step.’”

This puts them in direct violation of the Bernstein Rule: if you supported the tax cut, you can’t complain about the deficit.

A few of my CBPP colleagues have a new piece out about everything that’s wrong with the tax bill, and in this context, look at the section on why “…the nation is facing long-term fiscal challenges that will require more revenue, not less.  The new law…weakens the tax system’s ability to deliver on its core responsibility: raising sufficient revenue to adequately finance critical national needs…”

It’s really that simple. According to CBO, even including macro offsets, the tax cuts add $1.85 trillion to the debt over the next decade. Readers know my rap on this. The ultimate target of Republican fiscal policy is Social Security, Medicare, Medicaid, SNAP–the “entitlements.” Since they can’t politically cut them outright, they must starve the Treasury of revenues and then argue, as the Hoover’ites do, that we have no choice. After all, look at those deficits (to which we just added $2 trillion)!

That’s some serious chutzpah.

My second point is that the entitlements are actually a somewhat arbitrary target. That is, as long as we’re running up the debt, we’re increasing not collecting the revenues necessary to support spending. That means one could just as easily argue “we can’t afford the military!” as “we can’t afford the safety net!”

It’s true that the entitlements are on automatic compared to other spending that must be appropriated, but does anyone think the Defense Dept. is going to take a significant hit because we’ve recklessly cut taxes? That there’s a rhetorical question.

The moral of the story is: don’t listen to people telling you what we can’t afford, especially after they rammed through a huge, complicated, loophole-ridden, revenue-wasting tax cut.

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3 comments in reply to "Some lynx: Unions, CBO’s new baseline, the Bernstein Rule…"

  1. spencer says:

    remember, military spending is just another form of welfare spending.

    It pays people to consume without earning anything.

  2. Peter K. says:

    Regarding the wildcat strikes link, it’s been suggested that Freud, Althusser and the New Critics employed “overdetermined” before political scientists.

    Maybe Bezos wouldn’t like that fact.

  3. Procopius says:

    We really can’t afford the military as it’s currently set up. They have managed to avoid creating an accounting system that allows they to even keep track of the contracts they have outstanding or where the payments are required to go. The F-35 has no apparent way to become a usable weapons system and is costing three to five times as much as the Russian and Chinese 5th generation fighters, which actually work. The new Gerald Ford aircraft carrier still can only launch a few aircraft before the magnetic catapult has to be rebuilt. They’ve already accepted it despite the fact that everybody knows it will be at least three years until they can begin sea trials, which are supposed to be completed and all faults corrected before a ship is accepted. Similarly with the X-1000 Destroyer. The good news is seem to finally be admitting that the Littoral Combat Ship is a failure, but they haven’t managed to cancel the project yet. In all these cases unnamed criminals got through the barriers to corruption in the military procurement system and got all these contracts awarded before the designs of the proposed systems were complete, and then committed the government to buying the goddammed things!!! Kind of like the decision to invest some billions in the anti-ballistic missile system intended, apparently, to provoke Russia, which has never actually succeeded in one of its tests. A great many people believe these massive failures are purposefully intended to provide consultancies and board memberships to retired admirals and generals. They are spread around all fifty states so that congress critters do not dare let them be eliminated, no matter how few jobs they actually provide.