Costs of Fiscal Austerity
David "Herbert Hoover" Cameron and George "Andrew Mellon" Osborne Destroy Business Confidence in the British Economy

We Read Duncan Black on a Failure of the Obama Administration

The only thing that you needed to know to understand the Principles of Animalism in Animal Farm was "four legs good, two legs bad"[1].

Similarly, the only thing you needed to know to understand the macroeconomic policy line of the Obama administration--or, rather, what the macroeconomic policy line should be--is "short-run deficit spending to speed short-term recovery, long-run budget balance to enable long-term growth."

That is the right economic policy for the country.

And that is a policy that America's communications media--who are, admittedly, not as bright as the turkeys and cows of Animal Farm--can understand and use as a framework for their reporting.

Unfortunately, Barack Obama could not stay on this message. He stepped all over it, creating confusion:

Barack Obama: FY 2011 Budget Message: To help put our country on a fiscally sustainable path, we will freeze non-security discretionary funding for 3 years. This freeze will require a level of discipline with Americans’ tax dollars and a number of hard choices and painful tradeoffs not seen in Washington for many years. But it is what needs to be done to restore fiscal responsibility as we begin to rebuild our economy...

I still have not heard a coherent defense of this line wobble--the claim that it buys Obama a lot of extra credibility as a deficit-cutter by foreclosing only an absolutely trivial amount of non-security discretionary funding is, I think, incoherent. And it makes Obama look ridiculous when he then turns and calls for congress to break his own newly-declared freeze:

Duncan Black

Duncan Black: Mixed Messages: There is a relatively simple coherent message, that short term deficits are necessary and additional spending is rather small relative to the long term projected deficits, but the Obama administration really has been all over the place on the messaging. It's good that they're pushing for state aid more strongly - I guess maybe someone in there finally convinced the important people that the jobs situation still sucks - but their premature embrace of MUST CUT SPENDING rhetoric has been a problem.


[1] With the added proviso that, as Snowball says: "a wing, comrades, is an organ of propulsion and not of manipulation. It should therefore be regarded as a leg."


UPDATE: The letter http://www.whitehouse.gov/sites/default/files/rss_viewer/president_letter_6-12-10.pdf makes no sense. Starting in paragraph 7:

If we allow these [state and local elementary and secondar education] layoffs to go forward, it will not only mean hundreds of thousands fewer teachers... firefighrers... police officers... their lost paychecks will mean less tax revenues and less demand for the products and services provided by other workers.... The increased matching for Medicaid FMAP... as well as the Teacher Firing Prevention Fund... would prevent these layoffs... they can be designed with appropriate safeguards to ensure that they achieve their objective of keeping people working, rather than rewaring states for poor past policy choices... the urgency is high... these provisions must be passed as quickly as possible...

And paragraph 11:

I have called for a three year freeze in non-security discretionary spending...

But a three-year freeze in non-security discretionary spending leaves no room for a Teacher Firing Prevention Fund. Budget sleight-of-hand has already moved a bunch of aid to states over from the "discretionary" to the "mandatory" side of the budget (that's why aid to states is channeled through the Medicaid FMAP match). And I presume there is some additional budgetary sleight-of-hand to take TFPF off the "discretionary" side as well. But it smells...

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