Think Tanks Follow the Money

Robert Samuelson states some facts about think tanks that, for some reason, aren't often voiced by elite columnists:

Most think tanks were once idea factories. They sponsored research from which policy proposals might flow. In the supply chain of political influence, their studies became the grist for politicians’ programs. But think-tank scholars didn’t lobby or campaign. Politicians and party groups did that. There was an unspoken, if murky, division of labor. This was [Stuart] Butler’s world.

But it’s disappearing, and many think tanks — liberal and conservative — have become more active politically. They are now message merchants, packaging and merchandizing agendas for a broader public. Heritage has long been aggressive in peddling its message and has become more so. In 2010, it created an affiliate — Heritage Action — that lobbied and mobilized grass-roots conservatives. In this world, I surmise, Butler’s role is diminished. By contrast, Brookings remains a bit more traditional....

What’s occurring is a subtle change to a major American institution. Heritage is not alone. To varying degrees, other think tanks face similar pressures. They will probably do less thinking and more politicking and self-promotion.

Probably? There's no probably about it.

Why would Brookings hire a right-wing ideologue like Stuart Butler? Why would Heritage hire Jim DeMint, a man nobody would mistake for a great thinker, as its leader? Follow the money.

I'm reminded of David Frum's (interesting, but flawed) novel, Patriots, in which a fictionalized think tank... I can't recall the name he used, but "The American Heritage Institute" might be about right... has relegated the old-timers who do traditional, nonpartisan research to its "founder's floor", while the newer "scholars" engage in little more than a free-for-all of politicking and money-grubbing.

Robert Samuelson Fudges More Numbers

Robert Samuelson is expressing skepticism about the success of the stimulus:

There’s the puzzle: monster stimulus, midget recovery.

How to explain the contrasting stories?

If Samuelson, an economics commentator, actually followed his subject, he would be aware that the stimulus was not so big in relation to the gap it needed to cover. Dean Baker has been addressing this issue for years.

The arithmetic on this is straightforward. With the collapse of the bubble, we suddenly had a huge glut of unsold homes. As a result, housing construction plunged from record highs to 50-year lows. The loss in annual construction demand was more than $600 billion. Similarly, the loss of $8 trillion in housing equity sent consumption plunging. People no longer had equity in their homes against which to borrow, and even the people who did would face considerably tougher lending conditions. The drop in annual consumption was on the order of $500 billion.

The collapse of the bubble in nonresidential real estate cost the economy another $150 billion in annual demand, as did the cutbacks in state and local government spending as a result of lost tax revenue. This brings the loss in annual demand as a result of the collapse of the bubble to $1.4 trillion.

Compared with this loss of private sector demand, the stimulus was about $700 billion, excluding some technical tax fixes that are done every year and have nothing to do with stimulus. Roughly $300 billion of this was for 2009 and another $300 billion for 2010, with the rest of the spending spread over later years.

In other words, we were trying offset a loss of $1.4 trillion in annual demand with a stimulus package of $300 billion a year. Surprise! This was not enough.

It's not as if Dean Baker is alone in his opinion. Paul Krugman seems prescient in describing Samuelson's form of analysis:

So why does everyone — or, to be more accurate, everyone except those who have seriously studied the issue — believe that the stimulus was a failure? Because the U.S. economy continued to perform poorly — not disastrously, but poorly — after the stimulus went into effect.

There’s no mystery about why: America was coping with the legacy of a giant housing bubble. Even now, housing has only partly recovered, while consumers are still held back by the huge debts they ran up during the bubble years. And the stimulus was both too small and too short-lived to overcome that dire legacy.

This is not, by the way, a case of making excuses after the fact. Regular readers know that I was more or less tearing my hair out in early 2009, warning that the Recovery Act was inadequate — and that by falling short, the act would end up discrediting the very idea of stimulus. And so it proved.

But, you know, Samuelson found an economist you've probably never heard of before, and the guy has a position at a brand name university and a blog, so why research any more deeply into the subject? Samuelson's primary argument is that we should live in fear of dire consequences that never materialized, and thus that the government should do nothing more to stimulate the economy. Fortunately for him, the Republican Party is on his side so we're apt to see the painfully slow recovery continue to inch along. If another recession hits soon, Samuelson may discover out that the phrase, "an economy in eclipse," has more significance than as a parting shot taken at those who actually understand the subject.

Robert Samuelson's Fudgy Numbers

You can count on two things from Robert Samuelson: Arguments that any amount of social spending is too much, and arguments that any amount of military spending is too low. I say that while accepting that there may be some social spending programs that Samuelson would maintain at present levels, or perhaps even expand, and some military programs that he might cut, but he's not interested in writing about those issues. In a big picture sense, he dislikes social spending, while depicting military and war spending as easily afforded pocket change.

It thus comes as no surprise that Samuelson is adamantly opposed to the proposed cuts to the Pentagon budget and the size and scope of the U.S. military. Predictably, his outrage is expressed largely in the abstract, and he chooses to completely ignore the issues of waste or of out-dated or redundant weapons programs. Instead he presents dubious arguments and fudges the numbers. It's difficult to believe that he could hold a straight face while writing his opening paragraph:

The crisis in Ukraine reminds us that the future is unpredictable, that wars routinely involve miscalculation and that brute force — boots on the ground, bombs in the air — counts. None of these obvious lessons seems to have made much impression in Washington, where the Obama administration and Congress continue their policy of defunding defense and reducing the United States’ military power.

I would love for Samuelson to explain to his readers how much additional U.S. military spending it would take to deter Russia from acting in what it perceives to be its best interest, and exactly how that spending would have an impact on Putin's decision-making. The issue is not that we can't counter Russia in a conventional war. The issue is that Russia is a nuclear power, and even if a war to liberate Crimea were somehow (magically) contained to that region and did not involve nuclear weapons, the human cost of such a war would be massive. Samuelson is more than smart enough to know that a $400 trillion U.S. military budget would not have deterred Russia. What does it tell us that his opening position suggests otherwise?

Next up, Samuelson whines that as military spending drops, Social Security spending increases. First, as should be obvious to anybody who claims to be a writer on economic issues, the two are not related. It is possible to have both high Social Security spending and high military spending. Second, the funding mechanisms are different. Social Security is designed to be self-funding. But for Republican obstructionism, as cheered on by the "Burn it down" position taken by Beltway pundits such as Samuelson, we would almost certainly have seen a reform bill pass early in Obama's tenure that would have reduced the measure of inflation for future Social Security benefits and balanced the books into the very distant future. Third, if Samuelson can do math, he knows that Social Security and Medicare spending are closely tied to the number of elderly people in our society, and he should have no trouble figuring out that the problem is not so much that the spending is "out of control" as it is that Baby Boomers are reaching retirement age. Fourth, the reasons to maintain Social Security and Medicare have absolutely nothing to do with the reasons our nation might have to modify its defense budget.

Samuelson next claims that there are two reasons why the U.S. has a military: to deter conflicts and to defend national interests. On the issue of deterrence, Samuelson argues that any large military budget cuts "symbolically undermines deterrence." What a wonderfully convenient argument for him: We can never make more than token cuts to the military, as to do so would send the message to the world that they can engage in military conflicts. Perhaps Samuelson is still clinging to the false hope that the end of the Cold War somehow meant an end to war, as it's difficult to find a region in the world where nations seem particularly disinclined to engage in warfare when they believe it's in their best interest. One wonders, what military conflict does Samuelson believe the U.S. is presently deterring (perhaps a Chinese invasion of Taiwan, or a North Korean invasion of South Korea?) and why does he imagine that the military cuts will even slightly affect deterrence.

The best examples Samuelson can muster are of China and Iran:

The United States’ military retrenchment won’t make China’s leaders less ambitious globally. (China plans a 12 percent increase in military spending for 2014; at that pace, spending would double in six years.) Nor will it dampen Iran’s aggressiveness and promote a negotiated settlement over its nuclear program. Probably the reverse. Diplomacy often fails unless backed by a credible threat of force.

If the best examples Samuelson can muster are that, if military spending is cut, China may go on an invasion spree and Iran will... do whatever it is that Samuelson imagines that they would do differently... you can see the weakness of his position. When you describe the current military actions taken by China, how can you suggest that those actions would be deterred if only we didn't reduce military spending from current levels? As for the notion that the U.S. would lack credibility to pose a military threat to Iran, post-cuts, that's absurd on its face. It's another assertion that Samuelson can't possibly believe.

Samuelson mentions that China is increasing its military spending by 12%, to support a ridiculous projection that at that rate they could double military spending in six years. His source tells us what such a theoretical doubling would mean:

Although the rise in the defense budget in the past three years has surpassed GDP growth, the share of military spending in China's GDP stood at less than 1.5 percent last year, well below the world average of 3 percent, Yin said, citing statistics.

A report released by London's International Institute for Strategic Studies showed the United States remained the world's biggest defense spender in 2013, with a budget of 600.4 billion U.S. dollars.

Robert Samuelson has been beating the military spending drum for a very long time. Back in 1997, he was complaining that 1996 military spending was a mere 3.6% of GDP. In 2012, by the CIA's measure, military spending was at 4.35% of GDP. While that number may decrease to 2.7% by 2017, a target that was included in the 2013 bipartisan budget deal, U.S. military spending would continue to massively exceed China's expenditure.

Samuelson's drum beating about China also belies his suggestion that military strength is inexorably tied to the percentage of GDP a nation devotes to military spending. He's depicting a nation that spends a mere 1.5% of its GDP on its military as the leading threat to the world military dominance of the United States. That should suggest a few things to Samuelson, including the possibility that the fact that the size of a nation's economy factors complicates the question of how military spending should be measured and that, even in relation to his beloved military spending, the law of diminishing returns comes into play.

Samuelson also glosses over the fact that nations enjoy a carry-over from past military spending. It's not the present level of investment that frees Russia to support Syria, or act military in nations like Georgia, Czechoslovakia and Chechnya. It's the legacy of its superpower status and its nuclear arsenal. Russia may not have the power it once held to project its might into the far reaches of the globe, but it has made clear that it can and will act to defend its perceived interests no matter what the rest of the world may believe. In other words, despite Samuelson's ominous warnings, there's no reason to believe that the proposed budget cuts would devastate the status of the U.S. military as the world's leading military power, or the status of the U.S. as the world's only remaining superpower.

Russia’s aggression in Ukraine raises the prospect that a sizable number of U.S. troops might be stationed in the Baltic nations or Poland. All belong to NATO; all must now feel more threatened by Russia.

While noting that this is fear-mongering of the worst kind, and that Russia understands the difference between acting against a NATO member state and a non-aligned state, once again if that threat is being felt the feeling is occurring at the end of a long run-up in military spending. If current spending levels aren't sufficient to keep nations from being afraid of Russia, then there's really nothing that we can do to make that fear go away.

A question Samuelson doesn't ask, let alone address, is whether it's even our nation's proper role to try to ensure that nations that are not our treaty partners are not in fear of military action by a neighboring nation. Samuelson seems to love the idea of the U.S. as a global policeman, no matter what the price, but I see little sign on whether he's reflected on whether that's an appropriate role for the U.S., or whether other nations should take a greater role in paying for and providing their own regional security. If it's crucial to Europe that the Baltic States never fear Russia, no matter how remote the possibility of actual military action, why should it be the U.S. that foots most or all of the bill for chasing away the bogeyman? And if Samuelson believes the statement he endorses at the end of his column, "the world has gotten no less dangerous, turbulent or in need of American leadership. There is no obvious peace dividend as was the case at the end of the Cold War", why does he imagine that the bogeyman will vanish even if we continue to spend at today's inflated levels?

It should also be noted that Samuelson plays the game that any cuts in military spending must be permanent. He disregards the fact that every time this nation has felt a need to increase military spending, those increases have occurred. The only budget or spending bill that really matters is the one passed by the current Congress, as the next Congress will remain free to institute its own spending priorities. Samuelson, I suspect, is aware of that fact, but he chooses not to acknowledge it because, as with his other omissions, he understands that once people realize that his rending of clothes over future military spending is a performance, and that if the circumstances require Congress will do what it has always done to maintain the military strength of the United States -- increase military spending.

Those Unsustainable Deficits....

Incredible,

Based on the math, it is hard to justify a $250 million valuation for The Washington Post. The company reported it lost nearly $50 million for the first half of the year on its newspaper operation that generated $138.4 million in revenue. Of the $50 million loss, nearly $40 million was a noncash pension expense. So you could argue that the company lost only $10 million on operations. But it lost $33 million in the first half of 2012, too, also including pension costs. Circulation fell about 7 percent in the first half of 2013.

This is the paper that employs George "The Ichneumon Larva" Will, Charles "The Greek" Lane, Charles "Stein's Law" Krauthammer and Robert "Shoddy Quality" Samuelson? One imagines those four have already agreed to massive cuts in their pay and benefits. (And then one wakes up.)

Detroit the City vs. 'Detroit' the Auto Industry

Robert Samuelson wrote one of the columns on Detroit that I find a bit frustrating, and leave me wondering if Samuelson has ever been to the city. Samuelson finds it to be a "great irony" that Detroit's bankruptcy "seems to suggest the obsolescence of central cities when just the opposite is true", pointing to the success and revival of "Boston, New York, Philadelphia, Seattle, San Francisco and others".

All have stubborn concentrations of poverty, but many have benefited from gentrification and stronger job markets. High energy costs, a backlash against commuting, lower crime and cities’ vibrancy have renewed their appeal.

But here's the thing: Detroit developed as something of a suburban city, the place where you could live the city life while residing in your own home. Detroit is not situated in an area in which developers are constrained by geography, and must redevelop within its limits. Instead, Detroit is sprawling - 139 square miles - with a low population density, roughly 5,100 people per square mile, as compared to New York City's 27,000 or San Francisco's 17,400. Thanks to poorly considered urban planning decisions in the 1960's, the sort of neighborhoods that have helped lead to redevelopment in other cities, loft conversions and the like, were bulldozed to make way for freeways. Mass transit is poor and, even if it weren't, if you were to develop new residential neighborhoods within Detroit, the jobs for people who could afford to live in them would largely lie outside of the city limits.

Samuelson then asserts that the leading reason for Detroit's failure is that "It became a prisoner of its dependence on the auto industry." Here, Samuelson makes the common mistake of confusing the common shorthand term for the domestic auto industry ("Detroit") with the actual city called Detroit. The problem is that the auto plants that used to employ residents of Detroit were for the most part around the city, and the hollowing out of Detroit was well underway before Michigan started losing those plants to non-union states. Workers were easily able to relocate to towns outside of the city limits while keeping their factory jobs. And as much as Samuelson complains,

In the 1950s and ’60s, most Americans — not just people in Michigan — took the dominance of the Big Three for granted. General Motors, Ford and Chrysler commanded about 90 percent of the vehicle market. Who could challenge them? The result was a plausible and self-serving business model: high wages, generous fringe benefits, job security (with supplementary unemployment benefits to cover workers during temporary layoffs). The compact generally bought labor peace between the companies and the United Auto Workers. Given their market power, automakers could pass most costs on to consumers.

But what made short-term sense spelled long-term suicide — for companies, workers, Detroit and Michigan. High costs, shoddy quality and mediocre management made the companies vulnerable to foreign competition from imports and nonunionized plants, generally in the South. Employment eroded. Worse, the auto industry’s model shaped the state’s labor market and policies. By 1978, average hourly earnings in Michigan were 32 percent higher than the national average. Michigan had an anti-business reputation. This frustrated the state in its efforts to diversify its economic base.

Again, Samuelson confused "Detroit", the domestic automobile industry with "Detroit", the city. Samuelson, who seems to be generally opposed to collective bargaining, drops "nonunionized plants, generally in the South" into the mix without mentioning the policy choices that led to the split between "union" and "non-union" states, as if the City of Detroit were somehow responsible for the Taft-Hartley Act. He neglects to mention that many of the southern states that benefited from the relocation of plants from Michigan subsequently experienced plant closings as factories were moved to the developing world. But perhaps most of all he isn't even capturing the reality of what was happening in Detroit and surrounding communities. Take a look at a household income map for Michigan from the year 2000. If you don't know that Detroit is in southeastern Michigan, well, now you do - now take a look at that map and tell me where Detroit is located. You can see that the area surrounding Detroit remained quite wealthy, while Detroit had average wages similar to the most isolated and rural parts of the state. In 2010 Michigan's per capita income was $25,135. The state with the lowest per capita income was Mississippi, at $19,977. Detroit's per capita income was $15,261. Michigan certainly has struggled in the face of a global economy and a loss of traditional manufacturing jobs, but the areas immediately surrounding Detroit remain the richest in the state while Detroit sits, impoverished, in their midst.

Now a second map. This map shows the ethnicity of the residents of the Detroit metropolitan area, "White people are represented by pink, Black people are represented by blue, Hispanic’s represented by orange and Asians by green." How many seconds did it take you to locate Detroit? Knowing that that the northern boundary of Detroit was Eight Mile Road, how many seconds did it take you to figure out where that road is located on the map? Knowing that there's a separately incorporated city within Detroit, the City of Hamtramck, how many seconds did it take you to figure out where Hamtramck is located?

Don't get me wrong - I don't mean to suggest that there is some sort of racial redlining at work, or that the boundaries of Detroit were drawn to include only poor black neighborhoods. The problem is that as Detroit has lost population it has been unable to provide adequate municipal services, while its property taxes are high due to the low value of its real estate. If you're an employer thinking about opening a business in Detroit, you have to consider that your workers are probably going to want to commute in from a suburb where they have better schools and municipal services, and that they're going to pay a city income tax. Unlike the cities that have existing working class populations, and where living in the city can mean a shorter commute - or a commute on public transportation - working in Detroit can mean a longer commute, with a higher tax bill to boot.

Samuelson pontificates,

By reducing debt and pension payments — though hurting creditors and retirees — bankruptcy might break this cycle. But there’s no quick fix. What Detroit teaches is that those who deny economic change often become its victims.

It's difficult to see how reducing Detroit's debt will "break" its cycle - which is much less a cycle and much more of a decades-long downward trajectory. It's even harder to see how reducing pension benefits for the city's retirees, many of whom still live in the city, will benefit the city. By national standards the pension benefits aren't even particularly generous. Samuelson's theories of economics often seem to be driven by austerity theory and thus tend to be counter-factual, but surely even he can recognize that further reducing Detroit's per capita income and giving its people even less money to support local businesses is more of a stumbling block than a road to recovery. The cuts may well be necessary to balance Detroit's books, but if Detroit does not do far more than that to reinvent itself this is likely its first bankruptcy, not its last.

What I would like to see Detroit accomplish is a serious plan to consolidate its all-but-abandoned areas, and to engage in the wholesale removal of abandoned buildings. To do that effectively will require an infusion of state and federal money - many abandoned buildings are simply too large or require too much environmental clean-up for the city to do itself, particularly when it has no money. But I don't see that the void inside of Detroit will be filled with new people, businesses and jobs unless developers are looking at brownfields ready for redevelopment, as opposed to having to spend a small fortune demolishing an abandoned structure, and it's not realistic that developers will want to erect new structures or homes alongside vacant, derelict shells. The reasons that there is development around Detroit, but little development within Detroit, are not state secrets. Detroit is not going to become what Samuelson describes as an "incubator[] for new ideas and industries" as long as most businesses don't preface the idea of building or expanding in Detroit with the phrase, "anywhere but...."

Samuelson's admonition about "Detroit" holds more true for the state as a whole, which makes sense given that the State of Michigan is more aligned with that conception of Detroit than is the city itself. Contrary to Samuelson's suggestion, though, that Michigan workers get paid too much and have benefits that are too good, the fact is that Michigan is best served by trying to attract the sort of jobs and talent that keep wages high in the counties around Detroit. Samuelson observes, "New York has recovered, led in part by a resurgent (and maligned) financial industry", so let's be honest - being grossly overpaid relative to your contribution to society isn't an impediment to urban renewal, or even something to which Samuelson actually objects. (We can note, also, that Beltway pundits are paid extremely well for what amounts to a marginal contribution to society.) It's a matter of finding jobs and industries that fit with the present economy.

Robert Saumuelson's ObamaCare Journamalism

If you read Samuelson's column, you know that he's not particularly interested in analyzing the issues of the day, so much as he is interested in advancing a specific, right-wing economic agenda. But he could at least make an effort, couldn't he?

To get some answers, I recently talked with the heads of four “professional employer organizations” (PEOs) — these are companies that act as “human resources” departments for small companies. They provide payroll services and advise on fringe benefits and government regulations. Their customers include construction companies, restaurants, small manufacturers and professional firms. Many of these firms are only now coming to grips with the ACA, because they’d assumed that the Supreme Court would invalidate it or that a Republican White House would repeal it.

That's the first place I would look for answers about the PPACA - a bunch of consultants who were apparently happy to reassure their clients, "Don't worry about ObamaCare because it will be repealed or overturned," or who knew better but were not sufficiently competent to convince their clients to prepare for the possibility that they might actually have to follow the law.

To encourage candor, we talked on a not-for-attribution basis.

As if they would own up to that level of incompetence and then speak with Samuelson on anything but a "not-for-attribution basis".

First, some companies now providing insurance are being hit with huge premium increases. Before Obamacare, said one PEO adviser, his clients typically received annual increases of 6 percent to 12 percent. “This year we’re seeing 30 percent rate hikes,” he said. The surge is blamed, rightly or wrongly, on the ACA’s requirement for more comprehensive coverage and on its formula for calculating premiums (aka “community rating”).

Seriously? Is it that the incompetence of the consultants who spoke with Samuelson reached beyond their failure to advise their clients to prepare to comply with the law, and extended into not even knowing the basic economics of health insurance and premium costs? Or is it that Samuelson didn't ask the obvious follow-up question, "Which is it - rightly or wrongly?" To be fair to Samuelson, I think he knows the answer, but if he said it out loud ("wrongly") his three-point list would as a consequence have only two points.

Second, most companies haven’t made final decisions. Those who have go both ways. Another adviser described a 250-worker car dealership with good wages but no health insurance; it will provide coverage and cut wages to help pay costs. Another example involved a 60-worker manufacturing firm with wages of $12 to $15 an hour. It offered bare-bones policies with steep deductibles. Confronting higher premiums for expanded coverage, the owner will drop insurance. He found the ACA “too complex,” said this adviser.

Should we assume at this point that we're talking about a cause of higher premiums other than those that employers rightly or wrongly attribute to ObamaCare? If so, it's pretty much a given that some employers will choose to drop insurance, pay the penalty, and let its workers seek coverage through the exchanges. They're probably better off than with the "bare-bones policies with steep deductibles" (i.e., "crap") policies Samuelson says their employer previously offered - I think it's safe to assume that Samuelson has a gold-plated Medicap plan on top of his own, government-paid, comprehensive Medicare benefits - the workers who need adequate insurance may be better served by their employer's choice. But seriously? The consultant who is paid to make the process as simple as possible for a client employer can't get his client past, "It's too complex"? And that would be the fault of... somebody other than the consultant?

Third, many firms are revising their business models to minimize insurance costs. One favorite idea: Hold workers below the 30-hour weekly threshold requiring insurance. Many part-time employees who work more (say, 35 hours a week) will lose hours.

I've heard about this little scheme, as well. The fixes are so obvious (e.g., setting the penalty based upon total employee hours) that the only reason that it's worth discussing is that people like Samuelson anticipate that Republicans will filibuster any effort to implement a fix. But you know what? It may not amount to much. When an employee is given a choice between working two jobs because his employer won't give him more than thirty hours, and working one job with decent health benefits, guess which job anybody worth hiring is going to choose?

If Samuelson had any experience working in an environment where employees earn at or near minimum wage, he would have some appreciation for how little it takes to convince an employee to change jobs. Samuelson wouldn't notice fifty cents an hour. Were he making $7.25 per hour, it would become a big deal. If you want to run the business with employees who don't mess up orders, don't waste food, are less likely to steal, are easier to train and supervise, etc., as a general rule you have to pay a bit more than the guy down the street. If my competitor in food service were intent on keeping his employees below thirty hours a week, I would be happily skimming the cream off of his workforce.

Another adviser mentioned a client, an engineering firm with 48 workers, that had deliberately restrained expansion.

This is where I make a coughing noise that sounds a lot like I'm actually saying "bull****". If this engineering firm truly is constraining its size to avoid giving its employees decent health insurance, it's not going to have much luck retaining engineers. They have even better options than the movie theater worker and hotel workers whose anticipated plight was, mere moments ago, giving Samuelson such... is the word, delight?

I would suggest that Samuelson stop "concern trolling" ObamaCare and propose some meaningful solutions, but... as I suggested up front, I see no evidence that he's interested in solving the problems ObamaCare is attempting to address.

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?

The Truth From Robert Samuelson

“The Washington Post didn’t hire me to tell you what they wanted you to hear. The Washington Post elected me to tell you the truth.”

- Robert Samuelson at the... Okay, he never said it.

Today, Robert Samuelson plays the game that "If only the presidential campaigns told the truth, they would agree with me on everything" game. He asks, "Is anyone in America gullible enough to believe this?" Assuming he's speaking of his spin, I expect that he believes so. Let's revisit the words he puts into the candidate's mouths, recognizing both that they're Samuelson's words and that, for all of his talk of truth serum, Samuelson could use a dose of his own medicine.

"Fellow Americans. For years, your beltway pundits — including me — have misled you. We insist that your government has made more promises than it can keep, even if the economy returns to full employment. We then tell you that even if your taxes go up, your public services are going down.

"As you know, the great driver here is that we live in a bubble in which septuagenarians can tap out two columns a week and make a six to seven figure annual income, with gold-plated employer sponsored health insurance. We are likely to complain that between 2011 and 2025, the number of retirees on Social Security will grow by nearly 50 percent to 66 million people; Medicare experiences a similar rise. We insist that resulting spending surge will perpetuates huge budget deficits. We tell you that the Congressional Budget Office estimates that if nothing changes, the budget picture will only get worse.

"I have no credible plan to control Medicare and Social Security spending. That is to say, there is a credible plan to control Medicare costs, but my biggest fear is that it will be implemented and I will no longer be able to advocate an end to Medicare. I'm a smart man, I know how things work in the rest of the world, and I know that the people of every other developed nation pay far less money for health care with similar, sometimes better, outcomes. I know that even if all we did was adopt one of those programs to replace our current government-sponsored insurance plans, or even better if we took the best elements and combined them into a new, American plan, we would see an immediate, massive reduction in healthcare expenditures.

"If we reduced our per capita health care spending to levels similar to those of Canada, Japan, or the better health plans of Europe, we could save more than a trillion dollars per year. You heard that correctly. It would not all come in the form of reduced government spending, it would also benefit businesses that provide insurance to employees and individuals who purchase their own insurance coverage. But I would rather waste that trillion dollars every year than endorse a system that contradicts my personal philosophy that our society owes its members no duty to ensure access to adequate medical care, and that the government should simply defer to market forces.

"You have probably noticed that I always speak of Medicare and Social Security. In fact, if you read nothing but my columns you might believe that I'm talking about a single program called 'Medicare and Social Security', even 'MedicareAndSocialSecurity', rather than two distinct programs. The reason for this is simple: healthcare inflation in this nation ensures that, absent reforms, Medicare spending is likely to continue to grow at an unsustainable rate. On the other hand, it would take modest adjustments to Social Security to have it be fully funded for another seventy-five years or century, even with conservative estimates of economic growth. I address the two issues together, as I want to use the budget projections for an unreformed Medicare program to take out Social Security, and I'm deliberately trying to confuse you about the relative financial stability of the Social Security retirement program.

"By cutting programs I oppose, I can ensure that there will always be money for programs and government ventures I support. You hear people complain about corporate welfare? Excessive military spending? The high cost of wars of choice? Pocket change, I tell you. And it's my firm belief the government should pick that change out of your pockets so that the programs and military adventures that I support can continue unabated.

"Also, frankly, I can keep tapping out two columns a week until the day I die, so I don't understand why everybody else can't do the same thing, even if they're manual laborers. I mean, typing is manual, so in a sense I'm a manual laborer, right? Ask any of my friends: Work isn't hard and as far as we're concerned people don't need to retire.

"You can disagree with me if you would like, but I will never cede an inch.

"I have also misled by suggesting that a modest, progressive tax increase to a level that history tells us won't impede economic growth represents some form of class warfare against millionaires and billionaires pay their fair share will solve much of the problem. It isn’t. I complain that modest tax increases on the nation's wealthiest earners, such as the President's plan, is estimated to only raise $440 billion over a decade. I complain that a modest increase in the capital gains tax, a tax Republicans used to argue should be taxed at the same rate as wages, will 'only' raise $236 billion over a decade. Now if we were achieving that type of boos from cutting Medicare or Social Security, I would be all over it. But we're not picking your pocket here - we're picking mine.

"I have repeatedly attempted to mislead you by pretending that we're not in a recession, and that the only possible source of new government revenue over the next decade would be that modest tax increase. I don't mention a return to a healthier economy and lower unemployment, because I want to complain that taxes on people like me won't be sufficient, in and of themselves, to balance the deficit and thus should not be imposed. I expect you not to notice that if we can save $70 billion per year by cutting Medicare benefits, no cut is too small. When I complain that 'projected deficits total $10 trillion' I expect you not to figure out that I'm talking about less than we could save right now by transitioning to what would still be a high quality national health insurance plan.

"You may have noticed that my argument isn't based in much of anything other than not wanting to have my tax bill go up. I offer no reason why I can't pay more. If I tried, you would probably start laughing. So instead I'll insist that even if we substantially raise taxes on the rich we still won't balance the budget, and hope that you don't notice that I'm still begging the question.

"I argue that we should reduce benefits for healthier retirees, hoping that you won't pay attention to the fact that retirees are more likely to maintain their health when they have access to quality health care. I argue that we should reduce benefits for wealthier retirees because I expect that once people of my class are getting less it will be easier to convince them to cut benefits for everybody else. And as we're keeping our pocket change - and trust me, we have a lot more than you - and often have gold-plated supplemental health insurance policies to cover the difference, none of us will have go to without. The point being, I'll argue that I want to minimize deficits, but my primary goals are to avoid other program cuts and tax increases."

Next we can revisit Samuelson's "President Romney" speech....

"Fellow Americans. The budget outlook is not as bad as I like to claim. Here's the truth: I want to cut programs that benefit you, because I don't need them. I'm rich, I'm well insured, I have a phenomenal income for a job I can easily perform for many years to come, and I thus simply don't care about programs like Medicare or Social Security. Yet if we preserve those programs without adopting the cost-saving measures taken by every other developed nation, even if my taxes go up a few percent, something I find unacceptable, we cannot balance the deficit without cutting programs that I believe to be important programs — military spending, including the ability to spend hundreds of billions or trillions of dollars on wars of choice in the Middle East and South Asia, and... I'll list a few programs that I would prefer not to cut and pretend that they're my real focus: the FBI, highways, the Centers for Disease Control and Prevention, the Border Patrol and others. The cost of cutting spending that I like the would be too great, whereas it's no skin of my nose to cut the programs you like but I don't care about. You've figured me out: I talk a lot about having to make 'tough choices,' while quietly chucking to myself, 'tough for you.'

"Did I forget to include education in that list of programs that I don't want to cut? The EPA? Nope. I'm perfectly happy to cut them. If I complain about school funding, you can expect that my argument is against teachers' unions or how to shift spending from state-run schools to the private sector where my peers - and my employer - can extract profits. My peer group loves to talk about the failure of public schools, but for the most part we send our kids to private school. Sure, we want some basic level of environmental protection, but we don't much care if coal mines destroy landscapes or pollute remote parts of the country we'll never visit, if brownfields in the inner city remain toxic, or even if the planet warms. We do genuinely care about global competitiveness, but we don't like to admit that where you see pollution we see a potential expense that could lower profits - and thus lower share prices and dividends. When we balance your interests against ours, we want to maximize the growth of our portfolios and profits.

"For the past 40 years, federal spending has averaged 21 percent of GDP, so I'll pretend that the world is static and that we can arbitrarily cap government spending at a slightly lower level than that average without examining what government actually does. And by imposing that arbitrary cap, I have grounds to arbitrarily cut other programs that have a low-priority for me, such as Amtrak. Unfortunately it's not enough to cut small programs that don't benefit me, as those savings will be more than offset by an aging population and health costs.

"As you know, I roll Social Security and Medicare into what sounds like a single program so I can pretend that they both must be slashed. For example, I make comments like, 'From 1972 to 2011, Social Security and major federal health programs averaged 7 percent of GDP; in 2020, they’re estimated at 12 percent of GDP.' I use that as the foundation for making hyperbolic statements like, 'Unless we control these programs, they will strangle the rest of government.' Truth is, I oppose reforms of Medicare and health insurance that could save our nation a trillion dollars a year on ideological grounds, and I know that some modest tweaks will leave Social Security solvent for the indefinite future, but I don't want to fix these programs - I want to slash them and, ideally, burn them.

"I will tell you that you should forget tax cuts, but don't let that fool you: I want the so-called 'Bush tax cuts' extended, so that I don't have to pay more taxes. I may demagogue that the scheduled expiration of that temporary tax cut represents a tax increase, imply that it's 'soak the rich' class warfare, or that the amount of money it would raise is insufficient to justify the burden on me, but don't get distracted. It's your tax cut I don't care about. I care very much about mine, and I intend to keep it.

I will argue that it is obvious that we should try to simplify the system and spur economic growth by cutting top rates and ending tax breaks, because that sounds good even though I can't make the case that it would work. Frankly, the biggest problem with my wish to cut taxes on people like me is that would require cutting tax breaks that provide a significant benefit to people like you, such as the mortgage interest deduction — and you'll probably object. But to balance the budget, we’ll still need to raise more, not less, tax revenue from the income tax or other taxes and, as the saying goes, better you than me. Since 1972, tax revenue has averaged only 18 percent of GDP and I should have been more honest with you over my tenure as a columnist that I want you to feel the pain of the tax increases and benefits cuts necessary to bring the budget into balance because the unacceptable alternative would be that I and my wealthy, insulated peer group feel some of that pain.”

A revision to Samuelson's closing:

As long as their remains a chasm between my Op/Ed rhetoric and governing realities I will do my utmost to haunt whoever wins. My traditional positions highlight a dilemma of democracy. People want their opinion leaders to tell the truth, but they are often misled by carefully crafted, deliberately misleading rhetoric. Somebody who is truly interested in helping our government form good policy might escape this trap by persuading public opinion to acknowledge distasteful problems. For example, it's much easier to demagogue against 'socialized medicine' and complain that Medicare - or should I say MedicareAndSocialSecurity - are going to bankrupt the country, but the truth is that adopting a quality program of national health insurance could bring the budget to near balance while giving us many more years, even decades, to work on ways to tame healthcare inflation. I'm not arguing that a national health insurance plan, even one that utilizes private insurance companies, private hospitals, and privately employed physicians, is an ideal solution, but I am going to abandon my lie by omission - those programs do exist and they represent a real solution we could implement right now.

"Alas, in my line of work, that level of candor in commentary is rare. Most pursue self-interest over truth even if this deepens long-term public mistrust. Sure, if you work hard for the people and point out the truth behind my brand of 'tough choices' sensationalism, you can be the big man on campus, and I literally mean on campus. But some of us didn't work hard enough to get Ph.D.s, let alone write textbooks or win Nobel prizes. You won't normally hear it from us, but there's a lot of luck in getting a nationally syndicated column, most of us don't actually have special qualifications that make us any better at analyzing these issues than you are. And once you have this job, if you play your cards right you'll be topping up your 'six figures for two columns a week' salary with five to six figure speaking fees, promises that your next book will be purchased in bulk or distributed through partisan book clubs such that you can command massive retainers and royalties, and you can rub shoulders with the most powerful political and business leaders in America.

"If I appear to favor Wall Street over Main Street, and Main Street over you, that's in part because that's the culture in which I'm immersed - that's actually the way my friends and I think. But when my values and priorities conflict with the wealthy and powerful interests whose favor I seek or want to keep, I'm going to be on their side. And that, pretty clearly, is why I'll tell you that we 'must' slash programs that benefit you, in order to preserve tax cuts and programs that benefit us, and won't mention alternatives that would work to your advantage and advance my stated goals but really, truly antagonize the people who keep columnists like me afloat on a giant sea of cash.

"You've surely noticed that my arguments on what government should do focus on dollars and deficits, not how we should evaluate and weigh competing priorities, certainly not on the human cost of the type of spending cuts I favor. Honestly, it's easier to get you to swallow this type of argument when I leave that stuff out, and my argument tends to fall apart when I have to start defending my priorities in concrete terms." If I scare you it's on purpose, because if you start thinking you're going to start seeing the holes in my arguments.

Update: Roger Cohen's latest column reminds me of a combination of what Ignatius was saying a year ago, combined with the comments Frum referenced. I criticized Cohen a few weeks ago for what I believed to be an unfair criticism of Obama; this column seems a bit soft on Obama. I want to be fair, myself, but it really is time for our nation to form and articulate a coherent policy on the Middle East and South Asia, as well as moving our formalized relationship with Europe out of the cold war era.

It's Hard to Fight Poverty....

So why try?

If you define the American Dream as the Horatio Alger myth, no doubt, its exaggerated and unrealistic. But if you define it more modestly as,

...a “social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are.”

Sure, that may be a somewhat utopian ideal, but why not strive for it? Why is Robert Samuelson so quick to discard the idea that we can, as a nation, aspire to achieve a level of equity in which children aren't discarded based upon their parents' economic circumstances, but are instead given an opportunity to achieve consistent with their abilities?

Samuelson complains that people were urged to pursue college degrees that did not return economic reward, and that people were encouraged (even facilitated) into buying homes that they could not afford. But the fact that a minority of college students and homeowners have bad experiences, in no small part due to overreaching, doesn't lend any support to the argument that they, or the much larger number of people who don't overreach, should not have the opportunity to reach in the first place.

Samuelson confuses equality of opportunity and equality of outcome. Can he truly not see the difference?

Saving the Middle Class By Hurting the Middle Class

A few days ago, Robert Samuelson wrote an odd column addressing the middle class. He points to the two candidates,

Republicans will accuse Barack Obama of destroying the middle class through policies perpetuating high joblessness and feeble economic growth. Democrats will portray Mitt Romney as a tool of the rich who doesn’t understand the middle class.

Samuelson responds,

This is mostly political symbolism. The idea that anyone can “save” the middle class assumes that it’s in danger of disappearing, which it isn’t, and that presidents possess sufficient powers to resurrect it, which they don’t.

Let's take a step back. Samuelson has told us that he expects the Republicans to (continue) accusing the President of "destroying the middle class through policies perpetuating high joblessness and feeble economic growth", and that he believes that claim to be false. He compares that to the anticipated Democratic Party argument that "Mitt Romney [is] a tool of the rich who doesn’t understand the middle class", an assertion that is fairly described as "mostly political symbolism", but which is not an economic argument. That is, Samuelson's attempted parallel between that statement and what he describes as a fabricated economic narrative from the Republicans fails, because they address different issues. He's also comparing a statement of opinion about Romney, one with which he expresses no actual disagreement, with what he claims to be a false statement of fact about the economy. A better comparison would be if Samuelson had said, "Democrats will portray Mitt Romney as a tool of the rich who wants to cut taxes for the rich while implementing policies that make life harder for everybody else." Samuelson could argue that such a position would be an exaggeration - for example, Samuelson might believe that we need only make life more difficult for a huge swath of the population, not for the entire middle class - an argument he makes later in his editorial. But his attempt to analogize a false statement of fact on economics to a statement of opinion on personality does not hold up. Samuelson next tells us why the parties are attempting to connect with the middle class - or at least to create a rift between the middle class and the other party,

Still, the symbolism is potent because most Americans equate the middle class with the kind of society we are and ought to be. It is a society where hard work and personal responsibility are rewarded — where “getting ahead” is expected; where economic security and social stability are enjoyed; and where privilege is minimized.

Samuelson then proceeds to fumble between two competing arguments, the first being that "the middle class is fine, thank you very much" and the second being that the middle class is in serious peril. He does not attempt to reconcile his competing thoughts. In support of his position that the middle class is fine, Samuelson argues:

1. Most Americans think of themselves as middle class - "Only 7 percent of Americans called themselves “lower class,” although the government’s poverty rate is 15 percent.... Despite decades of rising inequality, only 2 percent put themselves in the “upper class.... Nine of 10 Americans locate themselves somewhere in the middle class.”

   The problem with that argument is that it does not rely upon either fact or economics. If I go to a prison and survey the inmates, and 90% of the inmates tell me that they are innocent, would Samuelson truly conclude "Therefore the vast majority of prisoners are innocent," or would he say, "We need a better measure"?

2. Some people with pretty high incomes think of themselves as middle class - "Many Americans with incomes of $200,000, $300,000 or more refuse to count themselves as rich."

   As previously noted, the self-report is not what matters. There are plenty of reasons why people at the lower end of the upper income brackets may say that they're "middle class" instead of "upper middle class" or... would Samuelson say "upper class"? They are likely to live in houses and drive cars not much different from those of their middle class peers, they may be burdened by large amounts of student loan debt, they may have very little in the way of accumulated assets. Also, as many have pointed out, the distance between those in the 95th to 99th percentile of income has expanded to the degree that the concept of what constitutes "wealth" has shifted - If your household income is $300K and you compare yourself to a family earning minimum wage, you might feel rich, but if you compare yourself to the class of people who are unquestionably rich, your lifestlye seems objectively middle class. Definitions and points of comparison matter.

3. A big part of the problem is "confidence" - "The middle class can’t regain its self-confidence and financial health without a strong economic recovery. But the economy can’t recover strongly without a financially healthy middle class, which provides most consumer spending."

   I know that economists like to speak of consumer confidence as a measure of how willing people are to make large expenditures, buy on credit, and the like, but the debt overhang to which Samuelson alludes diminishes the role of confidence. You can be certain that the economy is going to recover, but if your house is upside-down, your income is down and you can't get credit, you won't be spending money. Samuelson nods to that fact, "Not surprisingly, the economic expansion is glacial", but assumes that the government is powerless to assist. I suspect that if you were to point out possible interventions - debt forgiveness, across-the-board mortgage write-downs and the like Samuelson would speak of moral hazard. That type of relief, it appears, should be reserved for the financial industry and the unquestionably rich people who mismanaged them to the point of collapse.

4. Being "middle class" is a state of mind - Samuelson argues, "Personal responsibility and a strong work ethic still matter and suggest a durable middle class. It will survive today’s economic setbacks — and political pandering."

   The problem here is that there are plenty responsible, hard-working individuals who are falling out of the middle class, or who lack the skills, education, or toehold they need to pull themselves up the proverbial economic ladder. Samuelson's point reminds me of one of my pet peeves about Nicholas Kristof and his defense of sweatshops - yes, it's true that people work in sweatshops because the other options available to them are worse, but that doesn't mean the problem is solved. The idea that "[p]ersonal responsibility and a strong work ethic" should be enough to get you into the middle class is, as Samuelson notes, an American ideal. But its truth is diminishing.

A fair response to Samuelson is that the middle class is not a state of mind. If you're not in the economic middle class, your thought to the contrary will not change that fact. Your strong sense of personal responsibility and good work ethic may help you get and hold jobs, and get promotions, but personal virtues and "confidence" do not, of themselves, generate income.

Also, while it is true that if you define "middle class" as a strata of wealth between "poor" and "rich" it will in some sense always exist, that's not the issue we're confronting. The issue is, can we can maintain the ideal that every American who demonstrates the virtues Samuelson describes will have a chance for a bona fide, secure middle class lifestyle, or are we transitioning into a country with a smaller, less financially secure, less stable middle class. Are we going to be a nation in which most people want to be rich but are content to call themselves middle class, or a nation in which people at the lower end of wealth become, statistically speaking, the "middle class" between the ultra-rich and the working poor? Let's not forget, when you look at history, the modern world's experience with a large, robust middle class is the exception.

Samuelson also describes problems faced by the middle class,

1. People are no longer confident that they will achieve or sustain a middle class income: "The financial crisis and Great Recession subverted two core beliefs: that hard work ensures “getting ahead” and that being middle class provides security."

   Perhaps that's the "confidence" to which Samuelson was alluding, as opposed to "consumer confidence", but either way it remains the case that the present problem is not a state of mind. If people are no longer feeling secure, it's because the reality of the past few decades is that they are less secure. They can be less confident about how much they will earn, income growth, being able to afford a conventional "middle class lifestyle", how long they'll be able to keep their jobs, whether they'll be able to save for retirement.... And let's note at this juncture, the big "fixes" Samuelson keeps pushing for the nation's budget, specifically cuts to both Social Security and Medicare, will worsen that insecurity.

2. Unemployment is high and people are losing their homes: "True, they don’t affect everyone (about 5 million unemployed have now been jobless for more than six months; from 2007, completed home foreclosures total 4.5 million, reports Moody’s Analytics). But the demonstration effect is strong.... This psychological pall is compounded by widespread wealth loss."

   I'm reminded of a place I once worked where, during a previous economic downturn, any time an employee inquired about a raise the head honcho would pull a stack of papers out of her desk drawer, "These are unsolicited resumes from people who want your job, and they will work for less than you're already getting." It's not just that people are looking at the population of workers who cannot find jobs - it's that an increased population of workers realize that they're on the razor's edge. Their jobs could be outsourced, domestically or internationally. Their skills may be deemed obsolete. Samuelson should note, one of the reasons for middle class wage stagnation is that the middle class lacks the economic clout to force higher wages, and that's a problem that existed considerably before the start of the 2008-2012 recession.

3. People can't afford to save or invest, and there is a debt overhang in housing: I extrapolate from Samuelson's statement, "Wealth is slowly rebuilt through higher saving and stock prices — and the hope that home values will follow."

   I know that "on paper" many people were (and probably still are) "saving more" because they can't get credit, but even that's far from enough to "rebuild" their wealth. Samuelson alludes to the housing bubble, and the fact that much of the spending of the G.W. Bush era involved people cashing out "'paper wealth and housing wealth' — which went poof" when the housing market collapsed. Samuelson can't bring himself to say it, but he's implicitly arguing that the problem he describes dates back at least to the start of G.W.'s presidency and was masked by the housing bubble. Further, absent significant income growth or a new asset bubble, we're not going to see both significant increases in saving and investment and significant spending that will drive a strong economic recovery. It's not clear how Samuelson proposes that we achieve "higher saving and stock prices" for the benefit of the middle class, and in fact it appears that he's offering no solution beyond "keep waiting and keep hoping".

Samuelson then turns to a class warfare argument - not a war between classes, but a war he hopes to see played out within the middle class:

There is also a larger conflict. Sooner or later, broad-based tax increases will be needed to reduce budget deficits. How large depends on how much federal spending is cut. This creates an unavoidable conflict between workers and retirees, because workers are the biggest taxpayers and retirees are the biggest beneficiaries of federal spending. Which middle class deserves support? Cut Social Security and Medicare and help workers. Raise taxes and help retirees.

And we're back to one of my long-term frustrations with Robert Samuelson. To Samuelson, the only path to national financial stability is to cut programs he doesn't care about so we can afford to spend hundreds of billions of dollars in "pocket change" to support discretionary spending he endorses. Even if he underestimates he cost of government ventures he supports, even if by a factor of ten, twenty or more, they're still worth it. But if he doesn't support the program, don't look at the actual economics, don't examine reforms, certainly don't look at how other nations are providing similar programs at much lower cost - just cut 'em to the bone.

Social Security doesn't matter to Robert Samuelson, as he's a wealthy man. He can get by without it, and so can all of his friends, so it apparently doesn't enter his consciousness that many middle class Americans rely upon those benefits to make ends meet during retirement. It similarly appears to be outside of the scope of his experience that some people work a lifetime in jobs that don't generate enough income to allow them to accumulate significant wealth, or work in jobs that involve activity more strenuous than going to a comfortable office, sitting at a desk and typing on a keyboard. Samuelson is in a position in which he could reduce his work to one day a week and he would still pull in six figures; he does not appear to fully understand that most Americans don't have that luxury.

Samuelson has a similar history of decrying any effort to reform Medicare or rein in its costs, and rejects the idea that we should look at how other developed nations are able to achieve similar, sometimes better, health care outcomes while serving their entire populations, at considerably less expense than the U.S. system. He diminishes or criticizes efforts to limit the growth in healthcare expenditures, even though (or perhaps because) that's how we could make the present system sustainable, while providing no criticism of programs that would arbitrarily cap Medicare spending or replace the present guaranteed benefit program with a voucher program, without regard to whether retirees would be able to afford the care they need.

The only conclusion that can be drawn from Samuelson's refusal to acknowledge basic facts on the economics of Social Security and Medicare is that he is philosophically opposed to the programs, or perhaps supports them if they provide only the most basic of safety nets, and if people can't afford to retire or can't get needed healthcare, well, too bad. His "solution" is purely numbers based, after all who cares about good policy formation, and is built on the false premise that retirees are somehow depriving the "middle class" of a decent lifestyle. Never mind that middle class workers might hope to one day retire, or might not be rich and blessed (as is Samuelson) with gold plated employer-sponsored health insurance during their senior years.

Samuelson also appears to believe that healthcare spending does not impact the economy, never mind that healthcare spending is a huge portion of our nation's economy. He does not explain how Medicare cuts will not result in a reduction in healthcare spending, how the cuts will translate into middle class workers being able to afford to engage in more consumer spending, or how the two might balance out. For that matter, if we're overspending on Medicare and Social Security, Samuelson should be able to identify yet another internal inconsistency in his argument - the subsidy results in an increase in middle class spending (albeit by middle class retirees) over what would otherwise be the baseline and program cuts to help balance the budget will result in a net reduction in middle class spending.

Samuelson offers no explanation for how the cuts he repeatedly endorses will benefit current workers, as he is not proposing FICA tax cuts. Similarly, when Samuelson says "Raise taxes and help retirees" he's talking about income tax - not FICA - and his objection is to the expiration of G.W. Bush's temporary tax cuts (never mind that they did not deliver the promised economic boom) that benefit him. I don't recall Samuelson overtly playing the game of pretending that the only taxes Americans pay are federal income taxes, but when he conflates all tax increases in this manner his approach is not much different. It is very possible to increase taxes in a manner that puts the cost of maintaining Medicare and Social Security directly upon those who will eventually benefit from those programs, but Samuelson's concern appears to be that it will be his economic class, to which the benefits form those programs are literal "pocket change", that will be asked to share the burden.

Samuelson's "solution" is for workers to keep on paying what they're presently paying, but to receive considerably less upon retirement. That's from from cutting "Social Security and Medicare [to] help workers". It's cutting those programs to either reduce the deficit or to fund the continuation or expansion of tax cuts for the wealthy, and so Samuelson can continue to endorse enormously expensive discretionary spending programs or wars on the basis that we can easily afford the added debt.

Samuelson knows he's a rich man. He's simply not honest enough, perhaps with himself and certainly not with others, to admit that the class war he endorses is not within the middle class, but is instead between himself and his wealthy, like-minded peers and the middle class. Samuelson and his peers will feel no pain from the cuts he proposes, and apparently would prefer to keep Social Security and Medicare in somewhat precarious states such that they can hand-wring about the "necessity" of reform, rather than implementing meaningful reforms that would undermine the case for cuts.

If You're Serious About Balancing the Budget....

Robert Samuelson displays many of the foibles typical of his species, the Beltway pundit, and thus his calls for balancing the budget are often predicated upon the belief that in order to prevent fiscal catastrophe we must immediately cut entitlements, even though in the next breath he's willing to commit the same or more money to his own pet issues. The facts take a back seat to conventional wisdom. Such arguments can be frustrating in that they tend to ignore the needs of the people on the receiving end of those benefits and what will happen to them (and future beneficiaries) if spending is cut, lump all entitlement programs together regardless of how and how well they are funded, and disregard the issue of healthcare inflation both in terms of its role in the increased cost of Medicare and in relation to how retirees might get health care if the program is significantly cut. That said, we're talking choices and priorities, and it does appear that Samuelson really would prefer to have a balanced budget and to control the growth of the national debt.

A couple of days ago, Samuelson pointed out that Mitt Romney's "tax plan" makes no sense.

There seems to be a Democratic mole inside Mitt Romney’s campaign. Could it be Romney himself? Well, of course not. But considering the campaign’s behavior, it might just as well be. President Obama and his allies have cast Romney as a wealthy fat cat who’s out of touch with everyday Americans and who would use his presidency to enrich the already rich. To counter this damning image, the last thing you’d expect Romney to do is embrace a tax plan favoring the super-rich.

Actually, you would expect Romney to embrace a tax plan that favors himself and his ultra-rich friends and sponsors. What you would not expect him to do is to be honest about his intentions during the election, or even when pushing the bill. If you look at Romney's actual claims and statements, it's not that he's openly embracing a tax plan that favors the ultra-rich. It's that we know enough about his proposals that we can calclulate the enormous benefit he intends to provide to the rich and the additional tax burden his plan will impose on the middle class. Romney himeself is content to run around the country claiming that his tax plan is about "fairness", that "job creators" deserve tax cuts, and denying that he's going to soak the middle class and run the deficit through the roof.

Really, what we seem to have here is Samuelson recognizing that Romney's political spin is completely at odds with the facts and doing a double-take. Samuelson is so invested in the spin that the facts take him by surprise. And that's not a problem only in relation to Romney. Albeit in a more genteel manner than, say, Ross Douthat, Samuelson gives an approving nod to the Republican party line about the President:

The idea is to present a compelling contrast to Obama, whose low understanding of and meager sympathy for business seem plain and have arguably hobbled economic expansion.

It's not necessary to support the claim that the President has "low understanding" of business, because it's part of Samuelson's conventional wisdom. As with Romney's tax plan he might reconsider his position if hit over the head with enough facts, but he's not going to go out and investigate - that's a reporter's job. As for the "meager sympathy for business", again Samuelson gives no hint of what he means. But when you hear the most vicious complaints and attacks on the President they are often within the context of his desire to return to the Clinton-era tax rates for the wealthiest earners, the possibility of eliminating the privileged status of carried interest - the loophole billionaire hedge fund managers and people like Romney use to pay low capital gains rates on their income instead of paying the same rates as regular wage earners, a small increase in the capital gains tax to pay for the ACA on top of a possible return to Clinton-era tax rates for capital gains (following what used to be a Republican sentiment on different types of income), and his believe that it's appropriate to impose a modest estate tax on gargantuan estates. David Frum believes that part of the supposed angst of the wealthy is that the President recognizes that luck plays a role in the success of businesses and the accumulation of wealth, but I doubt that Samuelson would deny that fact.

Samuelson also repeats his canard that Obama's hypothesized lack of understanding of business has "arguably hobbled economic expansion". In other words, Samuelson is not comfortable endorsing that argument - he sees and offers no factual support for that claim. He is merely repeating it arguendo, without concern for the facts. Some Beltway pundits would explain that they present such unsubstantiated arguments in the interest of balance - the apparent notion that if you're criticizing Romney you have to say something bad about the President or you're being "biased", and if you throw in a criticism you can defend against accusations of bias by respoding, "Hey, I criticized Obama as well." I'm not sure what Samuelson's excuse is, but suffice to say if he can find absolutely no evidence in support of that argument he should stop repeating it.

So at the end of that blast of hot air, what does Samuelson believe Romney should do? What sort of pro-business reforms might Romney embrace to raise additional revenue or be more fair to the middle class? Samuelson has a number of ideas:

1. Increase the top income tax rate to 30%: "Although the wealthiest 5 percent still pay about 40 percent of federal taxes, it’s questionable whether further reducing their tax burden would bolster the economy.... Romney might have emulated Reagan by proposing a top tax rate of 30 percent....

2. Raise the capital gains tax to 30%: "In 1986, Ronald Reagan supported eliminating the preferential rate for capital gains, which then remained at 28 percent from 1987 to 1997. The economy did fine."

3. Eliminate irrational tax breaks, like the one employed by hedge fund managers: "Because low capital gains rates apply (illogically) to hedge fund and private-equity managers, we may have too many hedge and private-equity funds."

Samuelson also sees no need to eliminate the estate tax, pointing out that in 2009 it applied to very few estates ("only 0.6 percent of adult deaths") and that it's abolition is being pushed by Romney and his party primarily because of the need "to satisfy Republican constituencies, which fervently support ending the estate tax and keeping capital gains rates low".

That is to say, Samuelson appears to be embracing every single one of the Obama administration's tax proposals that supposedly shows "low understanding of and meager sympathy for business" - and saying, "That's a good start, but your proposed rate increases are inadequate." Samuelson is happy to jump on the "Obama doesn't understand business" bandwagon, whatever the facts, but can't understand why Romney won't propose a serious or credible budget proposal that doubles down on Obama's supposedly "anti-business" tax policies? Seriously?

What it it about Beltway pundits that leads them to so reliably complain about the need for some form of bipartisan compromise to balance the budget, criticize the White House for not somehow engineering such a compromise, then describe a desired outcome that is pretty much consistent with what the President has already proposed?

Protecting Romney from Criticism of Bain

Have you ever been in a car with somebody, waiting to pass an accident scene, while they observe that the traffic accident is not obstructing the road and that the only reason traffic is slow is because of the gawkers? And then, as they pass the accident, they themselves are distracted to the point that they don't notice that the car in front of them has driven on and they're now the gawker causing the slowdown?

The beltway pundits who call for more polite, mannered political campaigns remind me of that sort of driver. Actually, some of them seem a bit worse - some of them would stop their car in the roadway, get out, and share their opinions on the seriousness of the accident and whether it merited gawking, and offer running commentary about the other drivers passing the scene, oblivious to the fact that they've become part of the problem.

When the accident is cleared, they might recite that they're happy that it's over, but they'll keep bringing it up until the next accident comes along, and even then it may become a point of comparison. In many cases they'll talk incessantly about an accident in the northbound lane and, when you point out another accident, they'll express that accidents in the southbound lane are completely different.

Today, Robert Samuelson offers a lot of hand-wringing over problems in the northbound traffic lane, deploring what he calls "character assassination on the campaign trail". I don't follow Samuelson closely, so I am ready to stand corrected if he has in fact deplored past attacks on President Obama - Joe Wilson's outburst at the State of the Union Address, Justice Scalia's outburst from the bench, the entire "birther" phenomenon (Romney's contribution), absurd accusations that he's a socialist (in Romney's softened version, Obama "takes his political inspiration from Europe, from the socialist-democrats in Europe."), attacks on his religion, both his actual Christian faith and his imagined Muslim faith.... If Samuelson has ever demonstrated the slightest bit concerned about any of those acts of character assassination, I'm afraid I missed it.

But, oh, his heart melts for his friends in the financial industry.

Obama practices a cheap populism. He seems to presume that the complexities of the ACA and his repeated attacks on business (on oil companies, insurance companies, banks, hedge funds, private-equity funds and “the rich” in general) have no effect on the climate for investment or job creation. This is dubious.

It should be noted that Samuelson provides no context for any of this "repeated attacks", no quotes, no links. He also provides no evidence that any of President Obama's so-called attacks have resulted in any changes of policy, any economic impact, anything at all. "Dubious"? That's the best Samuelson can do? He thinks that substitutes for facts and evidence? I am aware that certain extremely wealthy people have complained that the President isn't sufficiently nice and deferential to them, and dares to suggest that they might bear some responsibility for the financial crisis and state of the economy. Samuelson apparently agrees with that. But when I look for what the President has actually said I find statements like this:

The tax cuts I’m proposing we get rid of are tax breaks for millionaires and billionaires; tax breaks for oil companies and hedge fund managers and corporate jet owners.

It would be nice if we could keep every tax break there is, but we’ve got to make some tough choices here if we want to reduce our deficit. And if we choose to keep those tax breaks for millionaires and billionaires, if we choose to keep a tax break for corporate jet owners, if we choose to keep tax breaks for oil and gas companies that are making hundreds of billions of dollars, then that means we’ve got to cut some kids off from getting a college scholarship. That means we’ve got to stop funding certain grants for medical research. That means that food safety may be compromised. That means that Medicare has to bear a greater part of the burden. Those are the choices we have to make.

Or this:

While full recovery of the financial system will take a great deal more time and work, the growing stability resulting from these interventions means we're beginning to return to normalcy. But here's what I want to emphasize today: Normalcy cannot lead to complacency.

Unfortunately, there are some in the financial industry who are misreading this moment. Instead of learning the lessons of Lehman and the crisis from which we're still recovering, they're choosing to ignore those lessons. I'm convinced they do so not just at their own peril, but at our nation's. So I want everybody here to hear my words: We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.

Does Samuelson have another, secret example of the President being mean? Because although I can characterize the elimination of tax breaks for corporate jets as symbolic, it's more than fair to suggest that calls for sacrifice should not stop with the middle class. Yet Samuelson sees that as an attack on "the rich"? Does Samuelson see a call for the end of subsidies as an attack on oil companies? An accurate assessment of the position taken by some within the financial industry, that the bailout signaled a right to return to business as usual, LIBOR fraud, reckless trading, manipulation of commodities prices, and the like, is an attack on "banks, hedge funds" and the like? Sadly, I expect so.

I'll present a counter-point from Paul Krugman:

In the wake of a devastating financial crisis, President Obama has enacted some modest and obviously needed regulation; he has proposed closing a few outrageous tax loopholes; and he has suggested that Mitt Romney’s history of buying and selling companies, often firing workers and gutting their pensions along the way, doesn’t make him the right man to run America’s economy.

Wall Street has responded — predictably, I suppose — by whining and throwing temper tantrums. And it has, in a way, been funny to see how childish and thin-skinned the Masters of the Universe turn out to be. Remember when Stephen Schwarzman of the Blackstone Group compared a proposal to limit his tax breaks to Hitler’s invasion of Poland? Remember when Jamie Dimon of JPMorgan Chase characterized any discussion of income inequality as an attack on the very notion of success?

And I'll let you wager about which of the two gets invited to the billionaires' cocktail parties. As Krugman put it,

But here’s the thing: If Wall Streeters are spoiled brats, they are spoiled brats with immense power and wealth at their disposal. And what they’re trying to do with that power and wealth right now is buy themselves not just policies that serve their interests, but immunity from criticism.

Fear not, young bankers, Robert J. Samuelson has your back.

Why is Samuelson suddenly so concerned about "character assassination"? Why is he suddenly willing to advance the silly argument that the President's occasional, seemingly consistently accurate, statements about tax distribution and the financial industry, are somehow the cause of a slow recovery? It's pretty obvious: the President's reelection team is targeting Mitt Romney's tenure at Bain Capital for criticism, and those attacks appear to be working.

Samuelson is on the record about "character assassination," true or untrue, fair or unfair, in elections:

We have entered an era of constitutional censorship. Hardly anyone wants to admit this -- the legalized demolition of the First Amendment would seem shocking -- and so hardly anyone does. The evidence, though, abounds. The latest is the controversy over the anti-Kerry ads by Swift Boat Veterans for Truth and parallel anti-Bush ads by Democratic "527" groups such as MoveOn.org. Let's assume (for argument's sake) that everything in these ads is untrue. Still, the United States' political tradition is that voters judge the truthfulness and relevance of campaign arguments. We haven't wanted our political speech filtered.

That is, unless it's working for the other side better than it's working for our own, in which case it's, "Look at that horrible accident in the northbound lane!"

Update: The substance of Samuelson's attacks on Obama, which were peripheral to the discussion above, have been ably tackled by Dean Baker.

Update 2: If Samuelson is concerned that Obama's occasional, accurate rhetoric is going to devastate the economic recovery by hurting the feelings of bankers, oh, how he must hate the facts.

Robert Samuelson's Wrong Approach to the Wrong Deficit

Robert Samuelson has written an interesting editorial in which he all-but-states that President Obama was correct to attempt massive stimulus spending, that Paul Krugman was correct about the economics of the recession and how to best get out of it, and that our nation would be better off had it focused on having smaller deficits during good times in order to be able to afford stimulus spending during difficult times. Samuelson has made similar suggestions in the past - he has been relatively consistent, and has credited Obama's stimulus with saving millions of jobs - but I don't believe he has previously laid out his opinion this clearly.

It's a shame that he chose not to make this argument three years ago, although it's difficult to tell what part of the explanation Samuelson's past reticence results from politics and what part results from his obsessive concern... not that we'll have deficits, but that we'll borrow to pay for programs he doesn't support. I suspect it's primarily the latter, as otherwise one would expect him to be calling for another substantial round of stimulus spending. Instead, he wrings his hands about the deficit.

Until the 1960s, Americans generally believed in low inflation and balanced budgets. President John Kennedy shared the consensus but was persuaded to change his mind. His economic advisers argued that, through deficit spending and modest increases in inflation, government could raise economic growth, lower unemployment and smooth business cycles.

None of this proved true; all of it led to grief.

The problem with Samuelson's argument is that the 1960's do not represent a magical turning point at which public debt went from bad to good. While gross public debt has increased since the 1960's, the debt to GDP ratio was much higher during WWII, and did not again rise significantly until the Reagan presidency. To the extent that the 1960's factor in, Samuelson would have to mention a different deficit - the trade deficit. In simple terms, the books have to balance: a nation with a trade deficit has to make up for it by having more public or private debt on its books.

It is also fair to observe that Samuelson is not even slightly concerned with how the changes of the past half-century have affected the wealthy - those best positioned to bring about change. In fact, any suggestion that the massive increase in wealth accumulation by the wealthiest Americans is anything but good is a "backlash against the rich". Does Samuelson truly believe we can balance the budget without increasing taxes - magic away the social safety net and "we're all good"? If not, observing that the rich are doing better than ever and proposing a modest tax increase on the very wealthy would seem to be a no-brainer for him - not a solution to debt and chronic deficit spending, but a necessary part of the solution.

Also, while Samuelson is correct that we had very high inflation for a period of time in the 1970's, and that very high inflation is a problem, he also notes that it was quashed in the early 1980's - a fact that undermines Samuelson's notion that deficit spending leads inexorably to high inflation. Let's note here, also, that the housing bubble was born of out-of-control inflation in housing markets, but that was seen by many in Samuelson's circle as a good thing. But even if overall inflation remains under control, inflation in an important sector of the economy that leads to an asset bubble is not a good thing.

The problem of deficits became much worse, not better, starting in the 1980's yet inflation has remained under control. Arguably we have a larger problem with low inflation than with the potential for high inflation - and that a modest, sustained increase in the inflation rate for a few years would help assets appreciate (including housing) and help resolve the "debt overhang" from the collapse of the housing market. Recall, our trade deficit has not disappeared, and we still have to come up with the difference either through deficit spending or private debt.

Robertson lectures us that past deficit spending "has limited government’s ability to 'stimulate' the economy through higher spending or deeper tax cuts", an argument that is not actually true. Our government has ample ability to borrow large amounts of money, and could easily implement a stimulus program of $1 trillion or more. For all of Samuelson's complaints that we are somehow hostage to a fifty year legacy of spending like there's no tomorrow, how could he lose track of the fact that the constraints on additional stimulus spending are political, not financial.

Implicit in Samuelson's argument is the notion that the deficit is currently so high that we should forego stimulus spending, even though it is our best hope of accelerating the recovering, getting back to full employment, and restoring the nations' tax base - part of our deficit, after all, results from the recession itself. When you fund government by taxing income, revenues drop when employment and (collective) incomes fall. It should be easy for Samuelson to identify areas (e.g. infrastructure) in which stimulus spending could be directed in no small part as an investment - our nation has to build and maintain basic infrastructure in order to remain competitive, we've not done a good job with such obvious targets for investment as the electrical grid, and right now we can borrow at very low interest rates.

After lecturing us on how sustained, excessive borrowing can be harmful, Samuelson proposes,

Now, imagine that the country had adhered to its balanced-budget tradition before the crisis. Some deficits would have remained, but the cumulative debt would have been much lower: plausibly between 10 percent and 20 percent of GDP. There would have been more room for expansion. Balancing the budget might even have forced Congress to face the costs of an aging society.

The problem being, we don't have the luxury of living in an imaginary world. We have to make the best of this one. And in this one, part of the problem that keeps deficits high and causes accumulation of debt is that people like Robert Samuelson see us as having a blank check for their pet projects, and only get upset when money is spent on the "wrong" things - in this case, seemingly the stimulus spending that Robertson sees as crucial to accelerating recovery but... but what?

Let's take a look for a moment at a half-truth Samuelson shares about balanced budgets:

Since 1961, the federal government has balanced its budget only five times. Arguably, only one of these (1969) resulted from policy; the other four (1998-2001) stemmed heavily from the surging tax revenue of the then-economic boom.

Well, yes, the Clinton era budget surplus arose due to factors that were largely accidental, and arguably irresponsible.

The Internet bubble burst and Clinton was on his way out the door, and we might have avoided a recession had we sacrificed some of the economic growth and tax receipts that resulted from the bubble. But you cannot look at Clinton's balanced budgets and Bush's deficits without acknowledging that the two parties took a very different view of their budgetary responsibility.

Clinton saw an opportunity to balance the budget, while Bush preferred to give massive tax cuts to the rich even though it meant returning to deficit spending. Bush also chose to ignore the growing housing bubble - a growth of private debt that, as previously mentioned, helped sustain massive trade deficits as Bush directed his massive increases in government spending at other targets, including Medicare Part D and a massively expensive war of choice.

In the past, Samuelson has taken positions that are inconsistent with each other, as well as inconsistent with his present position on stimulus spending. Now, nobody can be consistent all the time, given enough time and enough arguments made we'll all be inconsistent at times, and it's a good thing to be able to reflect, see past errors and inaccuracies in your premises and thinking, and change your mind. But that's not what I'm talking about. For example, in 2010 Samuelson argued,

If the administration has $1 trillion or so of spending cuts and tax increases over a decade, all these monies should first cover existing deficits -- not finance new spending. Obama's behavior resembles a highly indebted family's taking an expensive round-the-world trip because it claims to have found ways to pay for it. It's self-indulgent and reckless.

That statement was made in relation to providing health insurance to the uninsured. I truly doubt that Samuelson sees his own health insurance as a form of self-indulgence. His choice of works reflects his reflexive dislike of social spending, no matter what its merits. But if you were to assume that it is possible to locate that $trillion, why not initiate a $800 billion stimulus bill to be paid for over the decade - you would boost the economy, bring down unemployment, and still have money left over.

A fetishistic desire to reduce government spending should not substitute for sensible prioritization. It would seem that somebody in Samuelson's position, not somebody who favored helping the working poor or reviving the economy, would be the person best described as "shortsighted and self-centered", not the person who didn't put deficit reduction above all else.

Samuelson has had his feet held (gently) to the coals over a column in which he suggested that the Iraq war could be paid for with pocket change. Back in 2007, he issued a non-apology for what he admits was a ridiculously optimistic estimate of the cost of the war,

The war on terrorism has clearly worsened the long-term budget outlook. How then can I treat that so lightly? What's missing is context. Dominated by Social Security and health care, the federal budget now totals nearly $3 trillion annually. Suppose the war's ultimate costs reach $2 trillion by 2017 (the figure is cumulative, not in any one year). That's a big number, perhaps too big. It's also a wild guess. Still, the CBO estimates all federal spending over the same period (2002-17) will total $48 trillion; war spending would be about 4 percent. In the same period, the income of the U.S. economy (gross domestic product) would total an estimated $248 trillion; war spending would be less than 1 percent of that. The point, as I said in 2002, is that we're so wealthy we "can wage war almost with pocket change."...

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.

When it comes to Samuelson's priorities, a $trillion, $2 trillion? The numbers remain something akin to "pocket change". By that logic we could easily afford a $1 trillion stimulus bill right now. And just as with the war, we should not delude ourselves into thinking that "any 'savings' will rescue us from our long-term budget predicament" - one might expand on Samuelson here by pointing out that an invigorated economy with significantly improved employment will be much better able to reduce deficits and pay for social programs, as well as the war spending Samuelson would prefer for us not to even consider relevant to long-term budgeting.

But again, and don't go looking for internal consistency, for Samuelson this type of spending is always a huge risk.

Suppose a new stimulus — beyond renewal of the payroll tax cut — did succeed at significant job creation. By piling up more debt, it would still risk aggravating a larger crisis later. There is no long-term plan to curb deficits.

Irrelevant for a $2 trillion war, but an overwhelming concern for a much smaller stimulus program? It's as if nobody has ever explained to Samuelson that dollars are fungible. Yes, every little bit hurts - every new obligation makes it more difficult to bring the budget into balance. The impact of each new dollar of debt is the same, whether or not Samuelson approves of the expenditure.

Update: Paul Krugman documents the actual history of the ratio of US federal debt to GDP.

I’d add that the recent rise in debt/GDP is very different from what happened in the 80s; this time around we really had a crisis that required fiscal support for the economy. What happened in the 80s had no such justification.