Wednesday, March 23, 2011

Beware of the Gimmicks

We need substance, not gimmicks. Bruce Bartlett gives us several good reasons why a balanced budget amendment to the Constitution is not such a good idea (and several good reasons why Tim Pawlenty is not ready for prime time). The balanced budget amendment is a lot like threatening to not raise the debt ceiling or blasting earmarks or arguing to end foreign aid. It is a distraction from what actually needs to be done -- reducing the size of the government (mandatory and defense spending). Here is my favorite point that Bartlett makes. I know that I have made it a million times myself, but it needs repeating until it gets through the thick skulls of our leaders.
It’s doubtful that Mr. Pawlenty has any clue as to the composition of federal spending. In FY 2009 we would have had to abolish every discretionary spending program, including national defense, to balance the budget and that still wouldn’t have been enough without a penny of higher revenues, as he insists. We would have had to cut more than $300 billion out of Medicare and Social Security as well. Good luck with that.
We need to dispense with the notion that a politician is conservative just because he calls for gimmicks. It really sets the bar low. When he champions reducing mandatory spending, then we can consider him to be a limited government guy.

Cross posted at The Cross Culturalist

4 comments:

Right Wingnut said...

I'm not a fan of my former Governor, but I'm not sure Bartlett is the one I want to look for for advice.

His latest book is The New American Economy: The Failure of Reaganomics and a New Way Forward (Palgrave Macmillan, 2009).

Pablo said...

Have you read the book? Do you read his comments in this post? If so, what did you think about those comments? I know that it is much easier to dismiss an argument by throwing up the red herring of Bartlett's associations.

Better yet, just forget it. Keep reading Palin's tweets for your info. Obey Palin. She is so wonderful and great. She must be obeyed.

Matt Y. said...

It’s one thing to require a balanced budget when starting from a position of balance or near-balance. It’s quite another when we are running deficits of over $1 trillion per year for the foreseeable future. Even if we were not in an economic crisis and fighting two wars and responding to a natural disaster in Haiti, a rapid cut in spending of that magnitude would unquestionably throw the economy into recession just as it did in 1937.

I don't know exactly what Pawlenty has said about a balanced budget, but if we enact some major reforms and get the budget balanced first, then this won't be a problem. That's probably the only way that a BBA could be passed anyway. And as far as the difficulty of passing the BBA, entitlement reform is going to be just as hard to pass, and it'll probably be more politically toxic than the BBA.

And why does he attribute the 1937 recession to a spending reduction? According to Wikipedia, Roosevelt's administration began spending cuts in mid-1937, which was also when the recession began; but doesn't it take a year or so for this stuff to have an effect? The Fed tightened the money supply in 1936 and '37; this seems to be a more plausible candidate for the cause of the recession. (The "invisible hand" of the business cycle could have had something to do with it as well, apart from government). Amity Shlaes argued convincingly that the Great Depression was caused in large part because of stupid decisions by the Fed after the stock market crash in 1929. I'm no economist, but from my observation of history I trust monetarists more than Keynesians.

Matt Y. said...

It’s one thing to require a balanced budget when starting from a position of balance or near-balance. It’s quite another when we are running deficits of over $1 trillion per year for the foreseeable future. Even if we were not in an economic crisis and fighting two wars and responding to a natural disaster in Haiti, a rapid cut in spending of that magnitude would unquestionably throw the economy into recession just as it did in 1937.

I don't know exactly what Pawlenty has said about a balanced budget, but if we enact some major reforms and get the budget balanced first, then this won't be a problem. That's probably the only way that a BBA could be passed anyway. And as far as the difficulty of passing the BBA, entitlement reform is going to be just as hard to pass, and it'll probably be more politically toxic than the BBA.

And why does he attribute the 1937 recession to a spending reduction? According to Wikipedia, Roosevelt's administration began spending cuts in mid-1937, which was also when the recession began; but doesn't it take a year or so for this stuff to have an effect? The Fed tightened the money supply in 1936 and '37; this seems to be a more plausible candidate for the cause of the recession. (The "invisible hand" of the business cycle could have had something to do with it as well, apart from government). Amity Shlaes argued convincingly that the Great Depression was caused in large part because of stupid decisions by the Fed after the stock market crash in 1929. I'm no economist, but from my observation of history I trust monetarists more than Keynesians.