Economist Robert Reich and Mother Jones blogger Kevin Drum agree on the proposal put forth by co-chairmen Erskine Bowles and Alan Simpson last week to reduce the federal budget deficit. They agree that they disagree with it, that is. Or they at least disagree with where the report places its emphasis.
If the report misses the mark, where then should the commission be looking? “[A]ny serious long-term deficit plan will spend about 1% of its time on the discretionary budget, 1% on Social Security, and 98% on healthcare,” Drum writes.
Reich agrees, with slightly different percentages:
And, while the report suffers from the lack of attention it gives to health-care costs, it suffers a more fundamental flaw, according the Reich: The “unquestioned assumption that America’s biggest economic challenge is to reduce the federal budget deficit.”
This is Reich’s drum, and he beats it often. Calling it “budget-deficit mania,” he fears that too much attention given to reducing the deficit while still very much feeling the effects of the Great Recession could lead a slow, but steady climb out of that recession right off a cliff, ending in an economic flatline. Pointing out that in the past even a national debt of 120 percent of GDP has not been a lasting issue because the U.S. economy regained strength, Reich sees government as “the only remaining booster rocket” for the economy, since people aren’t spending and companies aren’t hiring. To focus too much on deficit reduction at the expense of investments that will improve the country will have dangerous long-term consequences.
While Drum dismisses the thing on its face:
Extra: Read a statement signed by more than 300 economists and civic leaders, including Robert Kuttner (a co-founder, along with Robert Reich, of The American Prospect), that fleshes out the job-growth path, as opposed to the deficit-reduction path to recovery.
*From http://www.cbo.gov/ftpdocs/93xx/doc9385/06-17-LTBO_Testimony.pdf: The alternative fiscal scenario deviates from CBO’s baseline projections even during the next 10 years, incorporating some changes in policy that are widely expected to occur and that policymakers have regularly made in the past.
Image from the Congressional Budget Office.