DeLong Smackdown Watch for July 1, 2010:
Apropos of my:
Doug Elmendorf Speaks! The Message I Hear: Stick to PAYGO and We Are OK...: The message I hear from this is: stick to PAYGO and we are fine. If Congress has to pay for every deviation from current law it passes--if everything that moves truly has to be deficit-neutral, as Milton Friedman first recommended back in the late 1940s that spending and tax bills needed to be conjoined twins--then things are under control. If not--if Congress waives PAYGO on a routine and ongoing basis for big-ticket items, as it always has in the past under Republican rule and sometimes does under Democratic rule--we are in trouble. Worth stressing is the magnitude of the gap: the magnitude of policies that CBO thinks will not be continued and that will not be paid for when they are changed, starting with the doc fix...
a correspondent says:
That does not fairly capture how difficult maintaining current law--or current law plus PAYGO--will be. The AMT, the doc fix, the R&E credit, plus a host of new revenues and spending cuts in the ACA, the Bush tax cuts, and other measures that are sunsetted in the current-law baseline all promise to place members of congress in a very, very difficult position if they don't suspend those policies year by year.
If finding offsets were easy and maintaining PAYGO politically palatable, we never would have gotten into the current situation in which even the 25-year fiscal gap between the current-law and the alternative-scenario baselines is 3.6% of GDP (1.2% fiscal gap for current-law, 4.8% for alternative-scenario).
