Monday, December 17, 2012

Bringing Facts Into the Budget Debate

I don't often see push-back against right-wing orthodoxy from the AEI but, in an article entitled Trillion-dollar deficits are sustainable for now, unfortunately, John H. Makin takes on a lot of the Republican Party's debt mythology:
Congress is attempting, unsuccessfully, to reduce “unsustainable” deficits and debt accumulation by engineering “crises” that are meant to force politically challenging action on spending cuts (entitlements) and tax increases (loophole closing, higher tax rates on the “rich”). The mid-2011 debt-ceiling crisis fiasco and the upcoming year-end “fiscal cliff” are striking examples of this dangerous tactic. The debt-ceiling crisis succeeded in getting Standard and Poor’s to downgrade US debt from a AAA to an AA+ rating and in setting up the sequestration portion of the upcoming fiscal cliff that has damaged business and household confidence by raising overall uncertainty.

The tactic of threatening to go over the fiscal cliff will fail to produce prompt, sustainable progress toward reduction of “unsustainable” deficits because deficits have been, and will continue to be for some time, eminently sustainable. The Chicken Little “sky is falling” approach to frightening Congress into significant deficit reduction has failed because the sky has not fallen. Interest rates have not soared as promised and, in fact, interest costs for the federal government have remained steady at a tiny 1.5 percent of gross domestic product (GDP) since 2002, having fallen to that level from a 3 percent average during the decade prior to 1997....

The hyperbolic claim that the United States is becoming Greece because of the absence of dramatic progress on deficit and debt reduction is unfortunately ridiculous. There is not yet a sign that a US fiscal crisis will emerge to force Congress to enact fundamental measures like entitlement reform to reduce the growth of spending, or tax reform to enhance revenues through faster growth.
Makin presents the case for reassessing the manner in which the U.S. government spends money, but is prepared to do so based upon the facts and long-term outlook as opposed to hoary bromides and fear-based arguments. Alas, that's probably why few have heard of him.

It's not necessary to agree on the causes of, or solutions to, the nation's debt and its projected growth in order to have a grown-up discussion of the issues. It's simply necessary that there be some grown-ups who are willing to discuss the actual facts and issues.

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