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Does Fiscal Honesty Pay?

July 9th, 2008 . by economistmom

The media are starting to paint a contrast between the Obama and McCain economic plans in terms of fiscal responsibility, pointing out that while “McCain promises to balance budget” (the headline of Mike Allen’s Politico article on Monday), “Obama won’t try for McCain’s budget goal” (the headline of Nedra Pickler’s AP analysis filed last night).

While deeper in, both articles express skepticism about Senator McCain’s ability to come through with said pledge, citing the Obama campaign as well as fiscal experts, it still seems that the opening lines and the first few paragraphs of each story–i.e., the most noticed parts–lean favorably toward Senator McCain, suggesting the winning (at least short-term) strategy with the press is to make a claim that sounds bold and impressive, even if it might ultimately be viewed as incredible. 

The Cliff Notes take-away as you skim the openings of both stories is of a stark choice:  A McCain Administration that would (make tough choices to) eliminate the budget deficit, versus an Obama Administration that would increase government spending (on “critical investments”).

The opening lines of the AP piece seem to almost bully Obama…

Barack Obama says John McCain’s plan to balance the budget doesn’t add up. Easy for him to say: It’s not a goal he’s even trying to reach.

Not only does Obama say he won’t eliminate the deficit in his first term, as McCain aims to do, he frankly says he’s not sure he’d bring it down at all in four years, considering his own spending plans.

“I do not make a promise that we can reduce it by 2013 because I think it is important for us to make some critical investments right now in America’s families,” Obama told reporters this week when asked if he’d match McCain’s pledge.

…and then goes on to suggest the stark choice voters face:

So what is more important in tough economic times? For the government to spend more to help hard-hit Americans or to eliminate a deficit that can lead to higher borrowing costs and slow the economy?

I find this contrast a bit misleading and unfair given that in reality, the Obama proposals for new SPENDING and new tax cuts aren’t necessarily more expensive than the McCain proposals for new spending and new TAX CUTS (and at this largely-theoretical point, could be even less expensive).  It’s just that the Obama campaign is acknowledging that it’s a mathematical impossibility to both increase government spending and reduce the deficit, while the McCain campaign is claiming it’s not a mathematical impossibility to both cut taxes and reduce the deficit.

(Sidenote that really could be another post:  By the way, acknowledging the difficulty in achieving these policy goals simultaneously doesn’t mean you have to abandon any of the goals.  The Obama campaign continues to emphasize fiscal responsibility as one of their economic policy principles, and they stress that they honor that goal with specific plans on how they’ll pay for each of their new initiatives–i.e., that they follow “pay go,” at least relative to a baseline of current policy extended.  As I’ve cautioned here before though, the definition of that baseline matters.)

As I said yesterday, just claiming you will eliminate the deficit, in four (or maybe eight?) years, doesn’t make you a deficit hawk.  But the bold claim might be enough to have you play a deficit hawk in the media.

Meanwhile, admitting you can’t live up to the other guy’s claim, well, it kind of makes you look like a fiscal wimp.

So unfortunately, fiscal honesty doesn’t seem to pay, not with the press at least.  We’ll have to see how it goes over with the voters.

16 Responses to “Does Fiscal Honesty Pay?”

  1. comment number 1 by: Patrick R. Sullivan

    Why limit your question to ‘fiscal honesty”? Does honesty about anything pay in politics?

  2. comment number 2 by: Patrick R. Sullivan

    For instance, these blasts from the past:

    ” We will scrap the Health Care Financing Administration and replace it with a health standards board — made up of consumers, providers, business, labor and government — that will establish annual health budget targets and outline a core benefits package.” –Bill Clinton and Al Gore, Putting People First, 1992

    ” Okay, what do you think the Health Care Financing Administration is? It’s a centralized command bureaucracy. It’s everything we’re telling Boris Yeltzin to get rid of. Now we don’t get rid of it in round one because we don’t think that’s politically smart. We don’t think that’s the right way to go through a transition. But we believe its going to wither on the vine because we think people are voluntarily going to leave it — voluntarily.” –Speaker Newt Gingrich, remarks to Blue Cross/Blue Shield conference, 10/24/95

    “Beyond that, the Republican Party, specifically Speaker Gingrich, said that he wanted to make changes that would cause Medicare to wither on the vine.” –Al Gore, ABC’s “This Week with David Brinkley,” 8/25/96

  3. comment number 3 by: Patrick R. Sullivan

    Also:

    “I want to make it very clear that this middle-class tax cut, in my view, is central to any attempt we’re going to make to have a short-term economic strategy.”–Jan. 19, 1992 Bill Clinton

    But, one year later:

    http://www.iht.com/articles/1993/01/15/cut1.php

    ‘ Seeking to explain why he is backtracking on a campaign promise to cut taxes for the middle class, President-elect Bill Clinton said Thursday that the plan was never a major theme in his race for the White House.

    ‘ Mr. Clinton, speaking at a news conference a day after saying he would have to “revisit” his tax-cut plan, said Americans voted for him because of the “big things” he wanted to do.

    ‘ The middle-class tax cut, he said, was not among them.

    ‘ He said he was “absolutely mystified” that the news media had perceived it as a major pledge.’

  4. comment number 4 by: Brooks

    Here’s an example of the press being unfair to Obama’s advantage. From the opening sentence of a July 7 Washinton Post front page article (article, not column or editorial):
    Sens. Barack Obama and John McCain are both proposing dramatic changes to Social Security, taking on the financially fragile “third rail of American politics”…

    Wrong. “Taking on the ‘third rail’” is proposing or saying you’ll at least consider REDUCING SENIORS’ ENTITLEMENT (SS and/or Medicare) BENEFITS (or eligibility). Only McCain is doing this, albeit without specifics and saying only that he’d consider such reductions. Obama is not touching that third rail at all. He is proposing a tax increase on annual earnings over $250k. That is NOT the “third rail of American politics”.

    http://www.washingtonpost.com/wp-dyn/content/article/2008/07/07/AR2008070702773.html

  5. comment number 5 by: coberly

    wrong, but not for Brooks’ reason.

    there is nothing financially fragile about entitlements. they can pay for themselves. indeed there is no better way to pay for the needs of seniors than to have them pay for themselves in advance through the protected from inflation insurance plan known as Social Security and Medicare.

    Where these plans are fragile, is from the complete ignorance of the public and the press, created by the campaign of lies by well funded think tanks over the past fifty years.

  6. comment number 6 by: Patrick R. Sullivan

    Well, coberly has just produced the answer to the question in the title of this post, hasn’t he.

  7. comment number 7 by: coberly

    Sullivan

    because you are not smart enough to understand something does not mean that it is dishonest.

  8. comment number 8 by: Jim Glass

    … Honesty in politics …

    Last week I was painting my mother’s bridge, and the fumes got to me a bit, and I began to dream or fantasize…

    It was a joint session of Congress, and they were about to vote to settle the entitlement issue forever…

    We have a $40 trillion unfinanced liability so far, and are adding $2.1 trillion a year. So now the American people have been fully informed of the facts and consulted about what they believe these entitlements are really worth to them. And following their instructions we are about to conduct our up-or-down vote. We will either …

    1) Keep all promised entitlements while fully funding them on an actuarially sound basis by increasing taxes $4.5 trillion a year, $2.1 trillion for their current accruing cost plus $2.4 trillion to amortize the $40 trillion over 75 years, by doubling the income tax, adding a VAT, and increasing admission fees to national parks, while saving and investing these funds by … (buying some small Asian nation to start? that part was unclear) … Or

    2) Repeal outright all unfunded entitlement promises, and begin re-enacting retirement benefits only after the American people judge them “for value” by agreeing to pay taxes fully paying for them on an actuarially sound basis from the date of enactment.

    And the result of the vote is … (the people from PricewaterhouseCoopers came forward with the envelope…)

    My mother yelled at me to get working again, I woke up, and never found out.

  9. comment number 9 by: Brooks

    Jim,

    Those must have been SOME fumes!

    I like the point you’re making and the way you’ve made it. Well done.

    Oh, and I can tell you how that dream ends.

    The envelope is opened. It says:

    The liberals of America say that all we really need to do is cut unnecessary Defense spending (meaning most of it, since it just gets us into trouble anyway and enables our leaders to kill brown people just to enrich the Bush family’s oil buddies), implement painless healthcare “reform” and tax the bejesus out of “the rich” and all will be just fine.

    The conseratives of America say all we need to do is keep cutting taxes — so revenues skyrocket — and cut wasteful spending and all will be just fine.

    The moderates and centrists say they might be ok with a little from Column A, a little from Column B, but nothing big.

    The only thing everyone can agree on is that you guys in Congress must be wildly wrong if you think that any real sacrifices on the part of most Americans are necessary, so we will make sure none of you get re-elected.

  10. comment number 10 by: Brooks

    Coberly,

    I’m guessing Patrick wasn’t implying in that comment that you were being dishonest, but rather that you are an example of someone who reacts negatively to any honest (and informed) presentation of the scale and nature of the long-term fiscal challenges we face and the degree of sacrifice — regardless of which set of sacrifices one prefers or is chosen — that will be necessary. And if most people react negatively to such “fiscal honesty” — whether their negative reaction is your particular type or some other misguided rejection of the reality — then fiscal honesty doesn’t pay.

  11. comment number 11 by: coberly

    Glass

    your comment was stupid. look up the real numbers and bring your mommy to help you remember them.

    Brooks… see note to Glass.

  12. comment number 12 by: coberly

    i have to get back to work.

    will try to check back later.

  13. comment number 13 by: Brooks

    coberly,

    If you (supposedly) don’t have time to put forth actual arguments, I suggest/request that you wait until you (supposedly) have time to do so, rather than polluting the comment section of an excellent blog with immature ad hominem alone. Perhaps you should stick to your regular partisan echo chamber blogs where actual, rational, substantive, responsive discussion/debate is unnecessary. necessary.

  14. comment number 14 by: coberly

    Brooks

    i have been putting out actual arguments here for quite some time. seems to have been wasted on some. that’s why you get the anger.

  15. comment number 15 by: Jim Glass

    Glass

    your comment was stupid. look up the real numbers and bring your mommy to help you remember them.

    Coberly, you seem to have an allergic reaction to real data that causes Tourette-like name calling.

    The real numbers for 2007 are a $2,094 billion present value unfunded one-year accrual for Medicare and Social Security, and a total $40,484 billion unfunded accrual for them to date. Now if you are as good at math as you say, you can figure out the annual amount needed to amortize $40.5 trillion over 75 years at 6% interest (the basic rate the Trustees use) and add it to $2.1 trillion.

    This all from the 2007 Financial Report of the United States, p.46. http://www.fms.treas.gov/fr/

    If that’s too difficult for you to dig out on your own, I’ve helpfully summarized the numbers here with links to the orginal data.

    BTW, the practical result of this is that to keep up with entitlement spending income tax rates have to increase 50% across-the-board by 2030 — including on retirees’ fixed incomes and Social Security benefits, of course — according to CBO.

    With the spending but without the tax increases, CBO projects that GDP starts falling in the 2040s and “the end” arrives in the 2060s (so much for 75-year projections!) while Moodys and S&P both say the credit rating of the US starts falling in 2017 (only nine years away) with it dropping to “junk” by 2027, according to S&P.

    Those are all real published numbers and dates you can get to through the links above.

    So read them for yourself … say you are sorry for the stuttering … and promise to take your pills more regularly.

    (And if you really believe that CBO, the Trustees, Brookings, Heritage, Moodys, S&P, et al are all “lying”, I suggest you up your dosage. Occam’s razor and all, you know.)
    ~~~
    As an aside to others on “does fiscal honesty pay?”… here’s your answer!

    Post a few numbers right out the Financial Report of the United States and reap personal insults against youself and your mother too!

    It’s no wonder the politicians won’t go anywhere near this.

  16. comment number 16 by: coberly

    glass

    actually you started the insults. but they look so much more charming outgoing than they do incoming.

    your numbers are a dogs dinner. try to make sense out of them. what do they actually mean? all you are doing is pulling espcially putrid pieces of meat out of a dumpster and saying, see! see! look at this!

    one thing that should give you a clue is when you say “income tax rates have to increase … to keep up with entitlement spending.”

    Social Security and Medicare have nothing to do with the income tax. they are paid for by the payroll tax. for a reason.

    as for increasing the payroll tax rate by 50%… that would be an increase of about 3% of payroll for Social Security… and that won’t happen for a hundred years. … but already we are getting into complexities you are not prepared to follow. i broke it all down for you in previous posts. but you prefer digging through the trash.