For the First Time in a Decade, an Administration Is Not Making Our Long Run Fiscal Problems Worse
This is, I think, something that makes us real deficit hawks happy--that we are, for the first time since the inauguration of George W. Bush, bending the curve and taking steps that help with our long-run deficit rather than steps that hurt.
Yet it does seem kind of quiet out there. Makes me think there are a lot of fake deficit hawks out there--people whose principal objection is not to unsustainable fiscal policies but rather to expenditures or tax expenditures that benefit the non-rich.
CBPP:
Congressional Budgets Pass Early Tests on Deficits and Economy, but Questions Remain: On the whole, the budget plans that the House and Senate approved yesterday pass the twin tests of: (1) beginning to address long-term deficits, or at least not making these deficits worse; and (2) not undermining the fiscal stimulus Congress recently passed....
Test #1: How would the budget plans affect the nation’s long-term fiscal problem? The budgets would somewhat reduce projected deficits. Some critics have charged that the House and Senate budgets would double or triple the national debt, while some supporters have said the budgets would cut the deficit by more than half. Both claims are problematic, for essentially the same reason: both mistakenly assume that the new policies proposed in the budgets are responsible for all of the changes in deficits and debt that would occur during the five-year period the budgets cover. In reality, the debt will grow in coming years primarily because of the large deficits that the Obama Administration inherited and the impact of the recession and financial crisis, while deficits will decline after the next year or so primarily because the economy is expected to recover. The best way to understand a budget’s impact on the deficit and the debt is to compare it to what deficits and the debt would be if we continued current policies. By that measure, the President’s budget would reduce deficits by $269 billion over the next five years and about $900 billion over the next ten years.[ii] The House and Senate budgets would reduce deficits by modestly larger amounts than the President’s budget over the next five years, provided that Congress strictly adhered to them.... Many of the same Senators and House members who launched the sharpest verbal attacks this week on the President’s budget or the congressional budget plans — on the ground that the deficits and debt projected under those plans are much too high — then opposed a number of the tough choices the President’s budget makes to start reducing deficits.... Many of these same Senators also pushed — in some cases successfully — proposals that would significantly worsen deficits, unless their costs were offset. And many of these Senators have a track record of insisting that the tax cuts they promoted in this week’s budget debate not be offset. Of particular note, the Senate narrowly went on record in favor of a large additional cut in the estate tax....
Test #2: Do the budget plans protect the economy in the near term? As funds from the recent economic recovery package begin to enter the economy and boost overall demand, it is important that policymakers not undercut that legislation by instituting funding reductions that reduce the demand for goods and services while the economy is still weak. The President’s budget calls for a 3.9 percent increase in total funding for domestic discretionary programs in fiscal year 2010, after accounting for inflation and several unavoidable cost increases for 2010 that are not related to any program expansion, such as the cost of conducting the next census.... Both chambers rejected efforts for significant cuts in domestic discretionary spending for the coming year, which would have weakened overall demand at a time when the economy almost certainly will still badly need a boost...
