Tag Archives: Budget

Moment of Blather

By James Kwak

David Brooks’s commentary on Paul Ryan’s “budget proposal” is entitled “Moment of Truth.” Brooks falls over himself gushing about his new man-crush, calling it “the most comprehensive and most courageous budget reform proposal any of us have seen in our lifetimes.” “Ryan is expected to leap into the vacuum left by the president’s passivity,” he continues.

Gag me.

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February 18, 2011

By James Kwak

Thank you for all the suggestions about my post on the3six5. I decided to write about my favorite topic: my daughter. But at the suggestion of several people, here’s another one (also limited to 365 words and in diary style).


Today I spent another two hours in the car, mostly on Interstate 91.

The section between Amherst and Hartford is the stretch of highway I know best in all the world. For six years I went to the Hartford airport every week or two for business. For three years I’ve been driving to New Haven for school. And I recently accepted a job in Hartford.

The thing that makes it at all tolerable is the radio — more specifically, the podcasts I play from my phone. My favorite, loyal readers know, is This American Life, followed by RadioLab, Planet Money, Fresh Air, and TED Talks. (When I’m too tired for anything even remotely intellectual, I listen to embarrassing music on Pandora.)

Most of those shows come from NPR or its affiliates. The spending cuts just passed by House Republicans eliminate funding for the Corporation for Public Broadcasting, which according to Wikipedia provides about 17 percent of all funding for public broadcasting stations.

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$1.30 > $1.00

By James Kwak

Bruce Bartlett (hat tip Catherine Rampell) reproduces a table from a paper by Suzanne Mettler showing that most people don’t realize that they are beneficiaries of government social programs. For example, 60 percent of people who take the mortgage interest deduction say they “have not used a government social program.” Now, while the mortgage interest deduction is a subsidy designed to enable people buy houses, you could get into an argument about whether it’s really a “social program.” But these are the analogous figures for some more classic welfare programs:

  • Social Security retirement and survivors’ benefits: 44%
  • Unemployment insurance: 43%
  • Medicare: 40%
  • Social Security Disability Insurance: 29%
  • Medicaid: 28%
  • Food stamps: 25%

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Fixing The US Budget – Straightforward Or The Hardest Problem On Earth?

By Simon Johnson

The conventional wisdom is that we face a serious budget problem, ballooning debt and political deadlock that prevents any semblance of progress either in the short term or over the next 20 years. “The sky is falling — cut everyone’s wages, slash Social Security, buy gold!” summarizes the mood of this midterm moment.

But step back and look at American public finances from any angle — historical, comparative with other nations, from Mars — and the picture is very different. We have a simple economic problem — we need to fix our tax system, irrespective of how much revenue we want from it. And we continue to face the central American political problem of the last 200 years: how much inequality are we willing to accept as reasonable and fair? Continue reading

More Ignorant Senators

By James Kwak

So apparently a JPMorgan Chase analyst thinks that senators showed “an unnerving ignorance of fundamental principles of market economics.” Senator Charles Grassley went one better and showed an unnerving ignorance of how the government’s own budget works.

In a hearing on the administration’s proposal to recover the net costs of TARP through a tax on large banks, Grassley said,

“If a TARP tax is imposed and the money is simply spent, that doesn’t repay taxpayers one cent for TARP losses. It’s just more tax-and-spend big government, while taxpayers foot the bill for Washington’s out-of-control spending.”

Grassley apparently thinks that when the government “spends” money, it doesn’t benefit taxpayers. What does he think the government does? Burn it? Give it to Martians?

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Greg Mankiw on the Deficit

By James Kwak

Broken record alert: Another post on the deficit ahead. Wouldn’t you rather look at funny pictures of cats? Why do I keep writing these? (Hint: The other side keeps writing them.) You have been warned.

Greg Mankiw, noted economics textbook author and former chair of Bush 43’s Council of Economic Advisers, has an op-ed on the deficit that is relatively sensible by the standards of recent debate. He points out that modest deficits can be sustainable, that taxes will probably need to go up, and that a value-added tax is a plausible option. He also points out that Obama’s projections are based on optimistic economic forecasts that very plausibly may not pan out, and that Obama’s main deficit-reduction strategy is to kick the problem over to a deficit-reduction commission, which are valid criticisms.

Unfortunately, his bottom line seems to be throwing more rocks at President Obama, under the general Republican principle that since he’s the president, everything is his fault:

“But unless the president revises his spending plans substantially, he will have no choice but to find some major source of government revenue. Ms. Pelosi’s suggestion of a VAT may be the best of a bunch of bad alternatives. Unfortunately, in this new era of responsibility, the president is not ready to face up to the long-term fiscal challenge.”

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Budget Sense and Nonsense

With the submission of the Obama administration’s budget today, fiscal silly season is opening. President Obama already launched an opening salvo last week with his proposed freeze on non-security-related military spending,which amounts to a rounding error on the ten-year budget projections, which are themselves a rounding error on the long-term budget projections– at a time when unemployment is running at 10.0%. Fortunately, there is a partial saving grace, which is that the freeze does not set until until fiscal year 2011 (which begins in October 2010), and in the meantime Obama has proposed $100 billion in tax cuts and government spending to create jobs. (Whether his proposals are the right way to spend $100 billion is a debate for another time.)

The midterm elections are looming already (note: do we have to be satisfied with a political system in which the legislature is preoccupied with upcoming elections half the time?), and the two big themes seem to be jobs and the deficit. With unemployment at levels not seen since the 1980s, it’s obvious why jobs are on the political agenda. With the federal budget deficit at record (nominal) levels, it also seems obvious that the deficit should be on the agenda, but this is really an unfortunate artifact of our political system. A government deficit is the result of insufficient government saving, and a period of high unemployment is absolutely the worst time to increase government saving. The sensible solution would be to use the urgency we currently feel to put in place long-term fiscal solutions, but the political system can’t handle that (see health care reform as Exhibit A). As a result, when deficits go up, we get lots of short-term politicking about the deficit–in Paul Krugman’s words, the “march of the deficit peacocks.”

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