When I was sort of critical of Krugman’s Fiscal Advice to the Democrats, I should have referred to Why are Stabilizations Delayed? by Alberto Alesina and Allan Drazen – which eloquently lays out the game of chicken that concerns me. So I owe one to Greg Mankiw who writes:
If Paul and his conservative counterparts get their way, then at least for now we won’t see a grand bargain between the parties of the sort I described in this WSJ op-ed earlier in the year.
Dr. Mankiw was correct up to a point to write:
To understand the challenge that Mr. Paulson faces, let’s start with a fact about which every serious policy analyst agrees: The government budget is on an unsustainable path. Americans are living longer and having fewer children.
We are living longer and having few children are bad things? Good grief. Dr. Mankiw is correct that fiscal policy is an unsustainable path. Why – because the Administration that Dr. Mankiw worked for was not honest about the needed revenues to cover all those free lunch promises from pandering politicians such as George W. Bush.
Look – I agree with the spirit of Dr. Mankiw’s criticism of the “grand bargain” aka fiscal insanity. But he is more guilty of being one of the “counterparts” than Paul Krugman ever was. Could we stop jockeying for advantage in his game of chicken and just level with folks about the fiscal insanity of the game of chicken that began with those fake 2001 tax “cuts”?
News reports are suggesting that Bush plans to send more troops to Iraq. Neoconservatives have been urging this very course of action for a long time. Indeed, they’ve been advocating more troops in general for years — even before the war started. And that’s not surprising. If you believe in expanding the worldwide application of American power, you need a military to do it. If you read old issues of the Weekly Standard, which is the bulletin board of neoconservatism, you can find calls for a bigger military going back to the Clinton administration.
So Bush should have known that defense spending would have to rise even as he pushed for the 2001 tax cut. Spend and borrow – the Republican way.