…because I’m an economist and a mom–that’s why!

President Obama: Everything Has To Be On the Table

April 27th, 2010 . by economistmom

The President’s “National Commission on Fiscal Responsibility and Reform” got started today, and the President said all the right things–especially emphasizing that everything has to be on the table (spending cuts and tax increases), or else once again all the agreement on the theory about the importance of fiscal responsibility won’t be borne out in practice.  From the transcript:

In theory, there are few issues on which there is more vigorous bipartisan agreement than fiscal responsibility.  But in practice, this responsibility for the future is often overwhelmed by the politics of the moment.  It falls prey to special interest pressures, to the pull of local concerns, and to the reality familiar to every single American — it’s a lot easier to spend a dollar than to save one.  That’s what, at root, led to these exploding deficits.  And that is what will lead to a day of reckoning.

Tomorrow (Wednesday) I’ll attend a “fiscal summit” sponsored by the Peterson Foundation and featuring President Clinton, Obama OMB Director Peter Orszag, and National Commission co-chairs Erskine Bowles and Alan Simpson.  I’ll report on it tomorrow night and might even “tweet” from the event.  (But if Ezra Klein’s going to be there, I won’t even bother; no one can out-live-tweet Ezra.)

Finding the “Relatively Easy” in a World of Hard Choices

April 26th, 2010 . by economistmom


A Wall Street Journal article by Corey Boles describes the tough work cut out for the President’s fiscal commission, meeting on Tuesday for the first time:

The commission must report back by Dec. 1 with suggestions about how to bring into line the federal government’s deteriorating finances. Groups representing both ends of the political spectrum are already decrying the panel as unlikely to succeed.

“We’re afraid the solutions they focus on will be entitlement cuts which are completely unwarranted,” Roger Hickey, co-director for the Campaign for America’s Future, an umbrella organization of liberal groups.

Brian Darling, director of Senate relations at the Heritage Foundation, a conservative think tank, said he feared the Obama administration would use the panel to justify tax increases.

“The bottom line is if you give politicians an easy way out they will take it,” Mr. Darling said. “And the easy way out in this case is tax increases and not cutting spending programs.”

The comments from both men illustrate the difficulties the panel’s members will face in trying to cobble together a bipartisan agreement…

Well, tax increases are certainly not the “easy way out.”  Just ask the Democrats in Congress why they weren’t lining up to sign onto Senator Conrad’s budget resolution.  I was told by a prominent aide to the Democratic leadership that this AP story by Andrew Taylor was “the article that killed the budget resolution.”

The WSJ story on the commission goes on to quote Concord’s Bob Bixby (based on this Concord blog post):

According to Robert Bixby, executive director of the Concord Coalition, a non-partisan fiscal watchdog, the panel should narrow its focus if its members want to succeed.

He said they should drop the goal set by Mr. Obama of seeking to bring the budget deficit down to around 3% of U.S. gross domestic product by 2015, something Mr. Bixby said was overly focused on short-termism.

“They might have the greatest success with social security,” Mr. Bixby said. “That would be wildly successful by modern standards.”

…but it left out the best part of the Concord statement (via blog) regarding Social Security (emphasis added):

They could begin with Social Security, which oddly enough has gone from being the “third rail of American politics” to the low-hanging fruit. Everyone knows what needs to be done but no one wants to do it. The commission could have a powerful effect by making an obvious recommendation to phase-in benefit reductions and increase dedicated revenues.

Let’s face it:  the President’s commission isn’t going to find “easy choices.”  (If there were such truly “low-hanging fruit”, it would have already been picked.)  Nope, they’re going to have to settle for the “relatively easy” among a universe of sufficient choices, all of which are pretty hard.

Is a Princeton Education Worth the Price? I Hope So.

April 23rd, 2010 . by economistmom

A few weeks ago I posted on my daughter Allie’s college decision, and in particular the debate between going to in-state UVA and Ivy League Dartmouth.  That was before Allie got accepted into Princeton, and before she and her dad decided she would in fact accept her acceptance into Princeton.  It wasn’t exactly the careful weighing of costs versus benefits that I wanted to do with her before she made that decision, but I think it was more in keeping with how I once characterized how parents typically decide how to spend money on “investments” in their kids or how family members decide how to spend money on health care for their loved ones:  two questions, (1) is there any positive expected marginal benefit, and (2) can I come up with the money, somehow?  (not how does that marginal money/cost compare with that marginal benefit).

So for a couple days now I am here at Princeton with Allie for her “Princeton Preview” weekend, hoping to be constantly “WOWed” by everything Princeton has to offer, and hoping that come Sunday I will have decided that yes, the expected marginal benefit is high even relative to the (certain and high) marginal cost.  Oh, and I am also doing a lot of searching and begging for aid and any way to pay for it that we can find.  Because although our family is not considered “needy,” when it comes to the Princeton price tag, I still think we “need” a lot of help.  As the summer comes and the first bill due draws nearer, I’ll keep you posted on how we manage.

Meanwhile, I would love any Princeton alums to tell me all the wonderful ways in which your Princeton education clearly enhanced your lifetime income and any other “values” in your life.  Those who disagree, please keep quiet.  ;)

Why a VAT? Give Me a Better Way to Raise Revenue.

April 21st, 2010 . by economistmom

Lori Montgomery’s story in today’s Washington Post highlights the tax-side version of how unreasonable the discussion over fiscal responsibility has become in this town:

As Washington braces for the first serious conversation in more than a decade about deficit reduction, some economists and independent budget experts fear that the hyperpartisan political atmosphere is narrowing the options for dealing with the chronic budget shortfall.

The latest sign: the emphatic rejection by both parties in recent days of a value-added tax, a sales tax imposed by nearly every other developed nation. After a White House economic adviser [former Federal Reserve Chairman Paul Volcker] was reported speaking semi-favorably about a VAT, the White House this week vigorously denied that President Obama is looking to include the tax in his deficit-cutting arsenal.

“This is not something the president has proposed, nor is it under consideration,” White House press secretary Robert Gibbs told reporters.

In Lori’s story, Len Burman expresses his frustration with perhaps a little exaggeration of President Obama’s position on taxing (only) the rich:

“We’re taking all the feasible, non-disastrous ways of dealing with our budget problems off the table,” said Leonard Burman, former director of the nonpartisan Tax Policy Center, who now teaches at Syracuse University. “We can’t cut Medicare. We can’t enact a VAT. We can’t raise any income taxes ever, except possibly on the 17 people who make over $1 billion a year.

“Behind closed doors, almost everyone serious in Washington understands there’s a big problem,” Burman said. “But in public, basically if you say anything intelligent, you’re killed.”

But Bruce Bartlett nails it when he explains that conservatives are so obsessed with the economic merits of low tax rates that they forget that revenue has its economic benefits as well, because deficits matter:

Historian Bruce Bartlett, a domestic policy adviser in the Reagan administration who has written extensively in support of a VAT, castigated McCain online for his “irresponsible attack,” arguing that a VAT would be far more efficient and less damaging to the economy than many of the alternatives, including higher income taxes.

“I think we have to remember that low taxes or tax rates are not an end in themselves; they are the means to an end, which is higher growth and greater prosperity,” Bartlett wrote on the blog Capital Gains and Games. “In this sense, I think right wingers pay far too much attention to the negative economic consequences of taxation while essentially ignoring the negative economic consequences of extremely large deficits.”

Oh yeah.  Why do we have taxes?  You mean they’re supposed to actually raise revenue to buy public goods and services, and to pay for subsidies–via tax breaks or direct spending–on certain (ideally socially-beneficial) activities?

If you don’t like the idea of an add-on VAT, then give us some better tax policy ideas to actually raise revenue–not just more ideas on how to lose revenue.  “Better tax policy” does not always mean “lower taxes.”  That’s what Bruce is explaining the conservatives often don’t understand.

Getting Specific and Creating a Movement

April 20th, 2010 . by economistmom


Last week’s USA Today article by Richard Wolf makes it clear that the status quo way of talking about the need for fiscal discipline just isn’t working.  From the story (my emphasis added), the co-leaders of the presidentially-appointed bipartisan fiscal commission pretty much tell it like it is:

The White House, Congress, budget experts and typical Americans are growing anxious about the nation’s mounting debt, which is helping to fuel the rise of the anti-tax, anti-big government Tea Party movement.

Yet the only solutions capable of raising enough money are politically dangerous for the president and Congress: tax increases and major reductions in Medicare, Medicaid and Social Security.

Neither Democrats nor Republicans want to take the first step.

The debt hasn’t stopped conservatives from saying tax increases should be off the table when the panel debates how to close Washington’s budget gap — an estimated $1.5 trillion this year alone, equal to the entire federal budget in 1995. Nor has it stopped liberals from saying Medicare, Social Security and other entitlements must be protected.

[Erskine] Bowles, [one of the co-leaders of the commission and] outgoing president of the University of North Carolina and a White House chief of staff under Bill Clinton, says neither taxes nor benefits can be off-limits.

“We can’t do this without a lot of pain,” he says.

His partner leading the panel, former senator Alan Simpson, a Wyoming Republican, eagerly awaits the howls of protest from both sides.

“I’ll be called the Republican toady,” says the 6-foot-6, salty-tongued Simpson. “I don’t give a crap.”

In case you’re wondering, the photo above is of a toad actually giving a crap (sorry if that grosses you out)…which is actually true of Simpson and Bowles in terms of the fiscal commission coming up with the specifically hard choices that would actually reduce the deficit–and both in the near term as well as over the more fundamentally challenging longer term, well beyond the 2015 goal of 3 percent of GDP deficits.

I think Bowles and Simpson well understand that policymakers (the experts and the politicians) need to get more specific about the necessary and tough policy choices (which are as difficult to look at as that toad above?)–and the need to talk about them with the American people very often and very openly.  Some examples of these specifically hard choices are outlined in Richard’s USA Today article.  And as the rest of Richard’s story emphasizes, to make real progress on this issue we need to create “a movement” (aha–also depicted above!)–and not just “educate.”  That “talk” about the tough choices needs to be engaging and not just informative.

It’s what we try to do at the Concord Coalition everyday because, yes, as a matter of fact, we do give a crap.  ;)

The Obama Administration’s Campaign-Promise Body Armor

April 18th, 2010 . by economistmom

Visit for breaking news, world news, and news about the economy

[UPDATE 6 pm Monday: video clip fixed and complete now!]  Watch the video clip from this Sunday’s Meet the Press of Treasury Secretary Tim Geithner to see how amazingly thick–and dense–that campaign-promise body armor is.  It’s obviously the Administration’s favored strategy to avoid the “politically explosive choices” that David Gregory attributes to my boss Bob Bixby.

This is more of the same: no courage from our policymakers on laying out the specifically tough choices necessary to get back to a sustainable federal budget outlook.  Administration officials and members of Congress are only willing to talk about tough choices until you ask them to explain “what tough choices, exactly?”

That’s also why many members of Congress aren’t so enthusiastic about laying out their plan for the budget this year.  (See the Concord Coalition’s statement on the need for a budget resolution.)  The necessary choices are so tough that the policymakers don’t want to spell them out in any way if they can help it.  They’d rather turn away from the problem than confront it.  It’s like they’re saying “it’s so bad, I can’t bear to look.”  And so nothing is done, nothing changes, and the problem gets even worse.  But the policymakers keep thinking everything’s alright because they feel safely ensconced in their thick (and dense) political body armor.

Dear Mr. President: It’s Tax Day. Do You Know Where Your Tax Policy Is?

April 15th, 2010 . by economistmom

April 15, 2010

Dear Mr. President:

With all due respect, I write this open letter to you as an economist and as a mom.  Just like parents ought to know where their children are at 10 pm, I think you, Mr. President, ought to know where your tax policy is–emphasis on your–on April 15th.  It’s your “baby” now, this complicated thing called the U.S. federal tax system.

For all the complaining you have done on your Senate campaign trail, and then your presidential campaign trail, and now even as President about how unaffordable and unfair and in general not very smart the Bush tax cuts were, why is it that the centerpiece of your–emphasis on your–tax policy thus far is the deficit-financed extension of the vast majority of these very same (not very smart) tax cuts?

Why do you spend over $2 trillion in your budget–the most you spend on any single policy item–on your predecessor’s tax policy, which you repeatedly explain is to blame for the deterioration and unsustainability of our nation’s fiscal outlook?  Meanwhile, you took back your own ideas for new tax policy–such as the permanent extension of the Making Work Pay tax credit–because you decided to put higher standards on your own tax cuts and actually pay for them (offset their cost with offsetting revenue increases such as climate change revenues), and Congress (even your own Congress) therefore balked.

I have news for you:  you’re in charge now!  You aren’t stuck with the (not very smart) Bush tax cuts–not any part of them!  You are the one who will have to sign an entirely new piece of legislation in order to keep any part of the Bush tax cuts after this year.  You hold the reins.  You don’t have to stay on the Bush path.  You don’t even have to stay on the Bush tax policy horse.  You can switch horses altogether and go down a better path on your better horse.

You have the human capital to take these reins and do much better.  Your economic team is comprised of some of the world’s foremost experts on tax policy–such as your NEC chair Larry Summers and your CEA member Austan Goolsbee and your OMB director Peter Orszag.  If any of them were made fiscal policy “kings of the day,” would they decide that deficit-financed extension of the Bush tax cuts (even if “only” for 95 percent of households) is the best tax policy they could come up with?  I suspect not, but just ask them.  It is a fun thing to talk around the water cooler about on Tax Day.

I know you made an unfortunate campaign promise on tax policy that you feel bound to–to not raise taxes on any households with income under $250,000.  But isn’t it more important to keep your greater (at least implicit) promise to the American people on keeping our economy strong, putting us on a better path (”changing” course), and leaving the nation in decent shape for our kids?  You can’t keep both promises, and to me as an economist and as a mom–and I hope to you as our leader and a dad–it’s obvious which one you should abandon.

Happy Tax Day!



Bush Tax Policy Doesn’t Pay for Obama Spending Policy

April 14th, 2010 . by economistmom

Of course, it didn’t pay for Bush spending policy, either, but the point is there’s even more of a disconnect between the revenues raised under the Obama-proposed Bush tax policy extended and projected Obama-proposed spending.

The above video clip from CNN’s IOUSA Solutions special (simply titled “Federal taxes fall short of spending” and featuring me on the panel and my boss Bob Bixby in the film) makes this simple point:  There’s a huge gap between spending and revenues, and no one solution, and in fact no “simple” solution (such as trimming only the defense budget or cutting only “waste, fraud and abuse”) will suffice.  And on the eve of the dreaded “Tax Day”, this should remind us that revenues, i.e., Taxes, will (unfortunately) have to come up.  But again, as only one part of the not-so-easy solution.

(Oh, and by the way, despite this story in yesterday’s Washington Post, I do think that gap between spending and revenues is still “huge”–even if it turns out to be “only” $1.3 trillion and not the Administration’s originally forecasted $1.6 trillion.  That was yet another way in which the Obama Administration seems to be continuing the federal budget practice of the prior Administration in ways I just don’t “get.”)

Top Two Reasons Why We Need Fundamental Tax Reform

April 12th, 2010 . by economistmom

Bill Gale makes the case for fundamental tax reform in the Brookings interview above, consistent with my “top two” list of reasons for tax reform I discussed in this past weekend’s CNN special on “IOUSA Solutions.” From the CNN transcript (emphasis added):

ROGERS: There are two questions. One is, are we raising enough revenue to cover our bills? Right now it’s obvious we are not. We don’t have a sustainable federal tax system.

A separate question is once you decide what the right level of revenue is, how do you raise it? There is nothing [that] says we have to stick with any combination of the Bush tax cuts, in fact, current law says they are going away at the end of this year.

So Congress and the administration are going to have to decide what they want to do. Do they want to continue Bush tax policy or replace it with something new?

I happen to think that the Obama Administration can come up with something better than just “Bush tax policy extended”–especially given how much they’ve complained about the poor quality of Bush tax policy over the years.  It is obvious that tax reform is needed both for deficit reduction and for the sake of tax policy itself, even if we didn’t have to raise more revenue.  I can’t imagine the President’s fiscal commission coming back to the President in December and telling him:  “gee, Mr. President, it turns out you’re right…Extending the Bush tax cuts and making up for lost revenue by raising tax rates only on the rich is a good idea.”

CNN’s “Your $$$$$” Show to Feature IOUSA Solutions

April 9th, 2010 . by economistmom


If you’re not too busy watching golf or your own kid on the Little League field (that’s where I’ll be on Saturday), please tune in to CNN for the “Your $$$$$” show on either Saturday at 1 or Sunday at 3.  From the “All Things CNN” blog, here’s the scoop:

This weekend, CNN’s Your $$$$$ will feature sections of I.O.U.S.A.: Solutions – America’s Debt Crisis, a groundbreaking and timely documentary that takes on what some say is the biggest problem facing our country – the national debt. In this follow-up film to the original documentary I.O.U.S.A. featured on CNN last year, the dire debt situation is explored from all angles. Your $$$$$ co-host Christine Romans moderates a panel that not only covers all viewpoints, but spans across generations. I.O.U.S.A.: Solutions is a documentary directed by Patrick Creadon, produced by Christine O’Malley, and presented by the Peter G. Peterson Foundation.

Panel guests include: Pete Peterson, Founder and Chairman of Peter G. Peterson Foundation, Co-Founder and Chairman Emeritus of The Blackstone Group and former U.S. Commerce Secretary; David Walker, President and CEO, Peter G. Peterson Foundation and former U.S. Comptroller General; Bill Bradley, former U.S. Senator and Managing Director, Allen & Company LLC; Amy Holmes, Independent Conservative and Co-Host, Talk Radio Network’s “American Morning News;” Diane Lim Rogers, Chief Economist, The Concord Coalition and Blogger,; Maya Maguineas, President, Committee for a Responsible Federal Budget and Director, Fiscal Policy Program, New America Foundation; Joe Johns, CNN Correspondent; Jeanne Sahadi, Senior Writer, CNNMoney.

CNN Your $$$$$ - I.O.U.S.A.: Solutions - America’s Debt Crisis will be 2 hours 1 – 3 pm (ET) on Saturday and 3-5pm (ET) on Sunday!!!!!!

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