UPDATE to “What if Eisenhower’s budget were your (grandparents’) family’s?”
In my first of two posts yesterday, “What if Eisenhower’s budget were your (grandparents’) family’s?”, about an ABC News item from the evening before discussing Obama’s proposed 2013 budget, and propagating the truism, so popular among pols and pundits, that the federal budget is like a family’s, only with eight zeroes following total expenditures, income receipts and carried debt, I mentioned that the piece contained a February 2009 clip of Obama promising that his final first-term budget would halve the deficit that his administration inherited. I saw the video because it was highlighted on the Yahoo News pages yesterday morning.
Jake Tapper, ABC’s White House correspondent said Obama was now breaking that promise. I pointed out that the promise probably was based in part on Obama’s intent to end some of the Bush tax cuts (the clip shown was just a few words of Obama’s comments). Reader RJS noted in the comments to my post that Dean Baker also posted a takedown of the ABC News report and of the silly federal-budget-and-family-budget analogy.
Baker also mentioned Tapper’s inclusion of the clip of Obama’s February 2009 promise to halve the deficit, and points out that the main reason that the promise is unfulfilled is that the economic downturn proved far more severe than Obama and most mainstream economists recognized at the time, and so the tax revenues have been correspondingly lower than anticipated.
I thought of mentioning this in my post yesterday, but didn’t because, well, y’know, a promise is a promise, and the Tapper’s point concerned specific economic legislation proposed by Obama. Baker notes that if Obama kept his promise now and proposed a budget that halved the deficit for fiscal 2013, the deficit reduction would be, um, pretty temporary, since drastically cutting government spending in a weak economy with a persistently high unemployment rate would weaken the economy further, leading to lower tax revenues ….
Of course, communicating this requires a short explanation of Keynesian economics. Which—who knows?—maybe Obama will actually start doing. If a gun is held to head.
Beverly
I only have a layman’s understanding of “Keynesian economics,” so I am unsure that a Keynesian solution would work under today’s circumstances. We have exporter our industrial base, and we have been cutting taxes for thirty years. How much stimulus can a body take? Maybe what it needs is some fresh air and whole grain simple foods.
It seems to me that O tried to “stimulate” the economy, but he did it the wrong way. Cutting taxes on people who already had too much money and were paying too little in taxes. And gave the money to the banks, who had caused the recession, and had too much money, which they were sitting on because they were afraid of… them selves.
A program of direct government spending on needed work, and easy loans to real businesses might have done the trick, while raising taxes not only on “the rich” but across the board… because telling ourselves we are overtaxed is the disease that is causing the problem.
Even O’s tax cut for the poor… results in about 400 dollars a year for the working poor, 2000 dollars a year for the well to do, and nothing for the out of work.
It looks to me like pretty good evidence that you can drive a car call “Keynes” right off a cliff.
And do not, please, think this means I agree with Republicans.
Beverly
I only have a layman’s understanding of “Keynesian economics,” so I am unsure that a Keynesian solution would work under today’s circumstances. We have exported our industrial base, and we have been cutting taxes for thirty years. How much stimulus can a body take? Maybe what it needs is some fresh air and whole grain simple foods.
It seems to me that O tried to “stimulate” the economy, but he did it the wrong way. Cutting taxes on people who already had too much money and were paying too little in taxes. And gave the money to the banks, who had caused the recession, and had too much money, which they were sitting on because they were afraid of… them selves.
A program of direct government spending on needed work, and easy loans to real businesses might have done the trick, while raising taxes not only on “the rich” but across the board… because telling ourselves we are overtaxed is the disease that is causing the problem.
Even O’s tax cut for the poor… results in about 400 dollars a year for the working poor, 2000 dollars a year for the well to do, and nothing for the out of work.
It looks to me like pretty good evidence that you can drive a car call “Keynes” right off a cliff.
And do not, please, think this means I agree with Republicans.
[btw.. it seems to me a matter of logic that O knew or should have had some idea about the nature of the recession when he made those promises. in any case it seems hard to disentangle “proved far more severe…” from “his policies didn’t work.”]