Sunday, May 19, 2013

Fools, Frauds and the Budget Deficit

It's probably not worth paying attention to Robert Samuelson on the budget deficit as he has little to no regard for consistency between his columns, and either has little to no interest in how government spending works or has little to know interest in presenting an honest argument. Nonetheless....

Samuelson is in a tizzy because the 2013 budget deficit is projected to be $642 billion, down from an earlier projection of $845 billion and well below "2012’s deficit of $1.1 trillion". Samuelson imagines that the government has now been overtaken by Dick "deficits don't matter" Cheney-types, and that the government is going to now stop focusing on deficit reduction and budgeting. Samuelson, it would seem, isn't spending much time following events in Washington. He's also continuing his mantra of, "We need to cut 'entitlement spending' so we can afford unlimited war spending", but has little to no regard for whether today's budget policies depress the economy and thus slow economic growth for years and decades to come.

You would think that Samuelson would look at the numbers and think, "We didn't anticipate a 24% drop in the deficit until almost half-way through the year, we're really bad at these projections." Even if you assume he hasn't looked at how projections of healthcare inflation have been incorrect. Or has forgotten his history, such as Alan "the genius" Greenspan fretting that if we didn't cut taxes for the rich, we would pay down the national debt too quickly. Funny, I don't recall the Robert Samuelson of that era criticizing Greenspan, "We can't pay down the nation's debt quickly enough." Did I miss something?) Samuelson then carries on for a while about stimulus spending, conflating any deficit spending with stimulus spending. Seriously?

The funny thing is, I'm prepared to agree with Samuelson. Our nation should have a responsible discussion of deficits and debt, albeit preferably with a significantly stronger factual context than one finds in a typical Samuelson column. We should be discussing priorities and, rather than engaging in demagoguery or attempting to gut Medicare without telling the public what we're doing, attempt to set actual priorities.

It seems to me that people like Samuelson don't like that idea, though, because the nation's priorities may turn out to be different from their own. Let's recall Samuelson's own words when his own priorities for government spending might end up on the chopping block:
But I am certain -- now as then -- that budget consequences should occupy a minor spot in our debates. It's not that the costs are unimportant; it's simply that they're overshadowed by other considerations that are so much more important. We can pay for whatever's necessary.
If a $2 trillion war of choice isn't even worthy of discussion, then the size of any particular budget deficit is even less worthy of discussion. What should matter are future costs and revenues, and the accuracy of our projections. By the same token that Samuelson can shrug,
Nothing of consequence has changed. A few numbers have shifted slightly. That’s all. They moved in a favorable direction. Next time, they might go the other way.
he should be prepared to concede that his emphasis of "We need to cut Social Security and Medicare this second or we'll face catastrophe in a quarter century" is misguided. After all, if being off by roughly 25% within a single year represents an inconsequential shift in the numbers that should be shrugged off, how can you justify setting policy based upon one or two percentage points of projected over twenty-five, fifty, or one hundred years?

Given the reality that our projections tend to be flawed - the future is full of surprises - and the present Congress cannot dictate spending priorities for future sessions of Congress, the proper focus for any given session of Congress is their actual, current, spending. By that measure, the present projections are good news, and the focus needs to be less on "what might happen twenty years from now" and more, "That's a good start, now let's talk about next year". In terms of long-term spending and spending priorities, we should be having the discussion that Samuelson seems intent on avoiding - if we can't afford everything, what do we cut first?

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