I wish someone would teach Lori Montgomery and Nell Henderson how to write a story about either fiscal policy or Social Security. “Unexpected gusher of tax revenue” and exploding entitlement spending. It’s like those silly scenes from the series Batman with SPLAT and POW. It’s not like they aren’t getting the right advice from the economist bloggers.
The article also includes the inaccurate claim that the Social Security trust fund is projected to “dry up completely” by 2017. Actually, the fund is projected to hold more than $4 trillion in U.S. government bonds by that date. President Bush’s Social Security trustees project that the fund will hold sufficient assets to pay all benefits through the year 2040. The non-partisan Congressional Budget Office projects that it will be able to pay all benefits until 2046 (and 80 percent of scheduled benefits in future years). The paper should at least be able to accurately report the Social Security projections.
Max has a cool graph that should make these easy for Lori and Nell.
Meanwhile, Brad DeLong objects to the title and lead paragraph, which suggest President Bush is trying to balance the budget. Brad notes the comments from Cato’s Chris Edwards come too late in the article:
“I get the impression they’re trying to beef up his reputation for fiscal responsibility, not by doing heavy lifting and actually targeting programs like farm subsidies, but through rhetoric and projections and changes in rules and things that are easy for a president to propose,” said Chris Edwards, tax director at the Cato Institute
I might say bravo to Chris but as long as President Bush refuses to allow for any reversals of his tax “cuts”, the kind of spending cuts that even the Cato crowd is talking about are not going to lead to fiscal responsibility.
The 1960’s Batman series was incredibly silly in my view but at least we knew it was fiction. Does the Washington Post realize how silly the writings of Lori Montgomery and Nell Henderson appear to their informed readers?
Today, I wish to apply this point of view to the economic policies of the Reagan Administration. The main elements of these policies are well known. Government expenditures are being reduced, with a seriousness that marks an obviously genuine change of direction. Tax rates are simultaneously being reduced, to levels that will surely increase the deficit, even taking the expenditure cuts into account. The Federal Reserve is being enjoined to keep the growth rates of monetary aggregates to levels consistent with perhaps a 4 percent to 5 percent annual price inflation, come what may. Future tax cuts have already been legislated, and future expenditure cuts are also promised, sufficient to bring the budget in balance by the end of the President’s current term. The arithmetic of this combination of actions and promises works out, mainly because the sizes of the future expenditure cuts have been left unspecified. They will, it is claimed, be as big as necessary to release tax revenues large enough to service the debt created by the tax cuts, to bring the budget into balance by the end of his term, and to let the Federal Reserve resolutely refuse to ”monetize” this debt with an inflationary increase of money.
I’ve taken only a portion of the second Lucas 1981 op-ed that Mark kindly reminds us of. There is so much more wisdom to gather from these two op-eds. But notice in particular that the Reagan crowd promised to cut spending in line with its tax cuts. Lucas wasn’t buying this promise back then. And it turns out neither was the Volcker Federal Reserve. The Reagan Administration never delivered on these promised spending cuts so the next two Presidents had to reverse at least some of the tax “cuts”. So why we to trust George W. Bush to deliver on fiscal responsibility? Maybe we can ask the Joker or the Riddler.