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Michael Boskin, an economics professor at Stanford and an advisor to George H. W. Bush had a fascinating opinion piece in the Wall Street Journal today. You can find the whole thing here, but essentially, he uses the Congressional Budget Office's analysis of Obama's budget proposals to argue that despite the President's rhetoric about fiscal prudence, his budget will:
To be fair, there are some things that Obama's budget needs to correct that have been somewhat neglected under Bush and Obama is going to do a lot of good things with that money. I also realize that in the current economic climate the government needs to spend. Even considering those things, this is a phenomenal amount of money he is proposing to spend. And someday if we ever want to pay off the massive debts our nation will incur, we really only have two options. Either we'll be paying much higher taxes in 10 years or we'll have to allow massive inflation to decrease the relative size of the debts. Neither sounds like a good option to me.
- Triple the national debt in 10 years
- Double the budget deficit over the next decade when compared with a do-nothing budget (continuation of the fiscal 2008 budget that only increases with inflation)
- Spend $4.829 trillion dollars above what would be spent with a do-nothing budget over 10 years
- Result in an additional tax-bill for every American worker for $34,000 a year to pay intrest on that just that additional debt over the ten years from 2020 to 2030
To be fair, there are some things that Obama's budget needs to correct that have been somewhat neglected under Bush and Obama is going to do a lot of good things with that money. I also realize that in the current economic climate the government needs to spend. Even considering those things, this is a phenomenal amount of money he is proposing to spend. And someday if we ever want to pay off the massive debts our nation will incur, we really only have two options. Either we'll be paying much higher taxes in 10 years or we'll have to allow massive inflation to decrease the relative size of the debts. Neither sounds like a good option to me.
First, I give Nick props because if you are going to be a conservative, be a Wall Street Journal conservative. The WSJ deserves a lot of respect. (I don't have much respect for people who have chosen the Limbaugh or Hannity types to be their intellectual leaders.)
ReplyDeleteSecond, I also made a post indicating worries I have about the current economic conditions. (Though the economist that makes me worry is Krugman.) However, these are complex enough times that I really wonder if anybody really knows what will happen. (Who would have predicted a month ago the stock market would climb steadily for a month and that the prices of homes would start rising already?)
Third, this opinion is by the "[chair of the] the Council of Economic Advisers under President George H.W. Bush". As John Stewart would point out: How many times can somebody be wrong and we still listen to his/her opinion? I mean, Bush's economic advisors went from inheriting a bustling economy with surpluses to making decisions leading to what we have today.
It's hard for me to trust such people. But again, I personally think that this is a volatile enough situation that I fear ultimately everyone is guessing.
But we will see.
Joe, I agree that these are uncertain times and that long-term predictions are difficult at best. For unknown reasons, economists don't state uncerainties, but if they did, I think the error bars on the numbers I stated would be huge. That being said, there are two reasons why I think this is a pretty decent estimate.
ReplyDeleteFirst, Boskin did not create these numbers, he is simply comparing last years budget projections (the "do-nothing budget") with this years, both from the Congressional Budget Office, which does a pretty good job of being non-partisan.
Second, Boskin advised the frist President Bush, not the second, so he was not directly influencing policy in the last 8 years. Granted if he is your average conservative he was in agreement with Bush's tax cuts, but probably not with Bush's deficits.
Okay, my mistake on which Bush he advised. That does make a difference in my mind and deserves an apology.
ReplyDeleteAlso, yes, I would like to know what the error bars are. If the numbers are accurate things don't sound that great. I admit that.
However, as Obama pointed out, there is no detailed conservative plan. It is easy to find the scary parts of his plan because he has one to criticize.
Seriously, given how many economists are calling for massive spending, are you sure that the conservative plan wouldn't have similar debt?
It's easy to say no, but it was Bush who up front approved a $700 billion dollar stimulus. Furthermore, perhaps the conservative plan would be highly criticized because it wouldn't create enough jobs or put enough money into banks...etc, which some would argue is more dangerous right now then debt.
I guess my point is: I admit, Obama's numbers sound bad. I wonder if the conservative numbers would be just as bad if not worse for other reasons.
Obama suggested our options are bad or worse. Until the conservatives have a detailed plan for all we know theirs is worse.
However, if they could come up with a plan and I see by and large economists praising it as a much superior plan, I would support it. I really would.
I am actually not terribly concerned with what Obama is spending in the next year or two. As Joe noted, the consensus among economists is that right now we need to spend, spend, and spend some more. However what concerns me is that Obama's budgets don't go back down in a year or two. Instead of temporary spending, Obama is planning on essentially making these kinds of expenses permanent, which I don't think we can afford.
ReplyDeleteAlso the "do-nothing" budget for comparison is Bush's 2008 budget, which included the $700 bail-out and the stimulus checks. Clearly they weren't enough, but we also won't need those amounts of economic stimulus (hopefully) for more than another year or two.
I completely agree with Nick's last point. I don't think we should have massive spending after the initial stimulus. I do believe the spending should recede after the recession goes away.
ReplyDeleteHowever, I have two questions:
1. Obama claims the deficit will be cut in half in four years. Does anyone know how that can happen but the debt keeps piling up? Or do people think Obama is wrong about being able to cut the deficit in half?
2. Isn't Obama's budget only good for this year? I ask because I wonder if Obama will have a different style budget say 5 years from now then today? He probably says he won't but I really wonder if changes in the economy won't change his mind.
But let me make things clear: My position is we should spend as little as possible to get the job done. It really is. I just see so many economists saying spend, spend spend that I fear a large budget is unfortunately needed.
But if three years from now times have changed, I hope Obama's budget similarly changes.
Also, I do trust the Wall Street Journal more than almost any other news organization so if they are raising a constant stick I believe there must be something to their arguments and so I am glad to have read this article.