Today the Concord Coalition released our second issue brief that references the presidential candidates’ economic proposals, “Fiscal Policy Beyond Election Day: Nine Challenges for ‘09“. Our first discussion of the fiscal policy platforms of Senators McCain and Obama was somewhat hidden inside our September issue brief on the CBO’s latest budget projections, “Baselines Matter“–which was about a week before all hell broke loose with the $700 billion rescue plan.
Ever since all hell broke loose, many in the “mainstream” and not-so-mainstream media, and policymakers and policy thinkers inside the Beltway, have–in one way or another–been asking fiscal hawks like me, “so, do you still think we should be worrying about fiscal responsibility–even now?“ To which I have tried to explain all along, here on my blog, that yes, I think we should still be worrying about fiscal responsibility–in a broader than strict deficit-reduction sense–especially now.
Despite all I’ve tried to explain here on EconomistMom, there are some folks out there who have used the current economic crisis as an opportunity to challenge the positions and motives of people like me, and organizations like the Concord Coalition. And although I’d like to believe that those who are attacking those of us who promote “fiscal responsibility” are just a minority of those who understand the economics of fiscal policy, I’m troubled by the fact that our critics are not just radical bloggers who don’t know what they’re talking about in terms of economics; they include economics professors, top economists from DC think tanks, and even our most recent Nobel laureate.
I’ve boiled down the criticism they’ve levied into three fallacies about “fiscal hawks”, which I will only try to respond to very succinctly here, referring you instead to today’s Concord issue brief (and actually any statement or report Concord’s issued in the past):
- Fallacy #1 about Fiscal Hawks: We believe that no matter what the economic circumstances, budget deficits must be reduced and deficit-financed fiscal policy opposed. FALSE. The Concord Coalition supports (well-structured) deficit-financed fiscal stimulus as an appropriate response to cyclical downturns. We also believe that if deficit-financed policy is justified as short-term stimulus, it ought to be timely, well-targeted, and temporary.
- Fallacy #2 about Fiscal Hawks: We promote and exaggerate our “gloom and doom” stories about the long-term budget outlook because we want to undermine and destroy the large entitlement programs (Social Security and Medicare). In fact, the so-called “unsustainability” of the fiscal outlook is just a “figment of our imagination.” FALSE. The Concord Coalition bases our analyses on the long-term projections of the (nonpartisan) Congressional Budget Office. That federal spending and revenues are together on an unsustainable track cannot be disputed. Concord “sounds the alarm” on the unsustainability of the entitlement programs in their current form, because yes, we do want to see them reformed so that they will thrive as public programs, rather than wither. We also believe that the scheduled level of indebtedness to be passed onto future generations, if the entitlement and tax systems are not reformed, is unacceptably high.
- Fallacy #3 about Fiscal Hawks: We’re only “carping” on fiscal responsibility now, in order to push back against the pressure from liberals for larger government. We didn’t complain about the deficit-financed Bush tax cuts or the war costs. FALSE. I don’t know where to begin here. Just go look at everything the Concord Coalition has written during the Bush Administration. And go look at everything put out by the Democratic staffs of the budget, tax, and economic committees in Congress since 2001. I know we weren’t exactly successful in pushing back against all the fiscal profligacy that took place during the Bush Administration, but hey, you’ve got to recognize the difference between “achievement” and “effort.” (The “carping” we’re doing now is still just in the “effort” phase, after all.)
Now, those who promote the above fallacies (really, conspiracy theories) about fiscal hawks who advocate for ”fiscal responsibility” probably won’t bother reading our issue brief, but I hope those of you who have a more open mind will. If you read the full document, you will learn more about the Concord Coalition’s position (and our intentions/mission) through these nine fiscal challenges we discuss:
- The financial crisis and its spillover into the broader economy has become the top agenda item for the new administration, regardless of prior campaign promises.
- Short-term fiscal stimulus must be combined with long-term fiscal discipline.
- Fiscal stimulus should maximize bang for the buck.
- Two problems that led to Wall Street’s crisis — lack of transparency and over-reliance on debt — are problems for the federal budget as well.
- Current fiscal policy is already on an unsustainable track.
- Health care reform must reduce the growth in costs.
- Eventually, we are going to need more revenues.
- Over the longer term, we need to save more and consume less.
- We need to budget as if it matters — because it does.