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The Economist Magazine on Doing the Seemingly Impossible

November 20th, 2010 . by economistmom

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This week’s (Nov. 20th) Economist magazine is devoted to the issue of deficit reduction in the U.S. federal budget–or as they put it in the title of their “leader” story, how to “speak softly and carry a big chainsaw.” The editors make the point that deficit reduction isn’t hard in mathematical theory, but it seems near impossible in political practice–at this moment, at least.  But they end their assessment on a somewhat optimistic note, not very different from my feelings on the prospects for changing course:

Devising a plan that reduces the deficit, and eventually the debt, to a manageable size is relatively easy. Getting politicians to agree to it is a different thing. The bitter divide between the parties means that politicians pay a high price for consorting with the enemy. So Democrats cling to entitlements, and Republicans live in fear of losing their next party nomination to a tea-party activist if they bend on taxes. Even the president’s own bipartisan commission can’t agree on what to do.

But true leaders turn the hard into the possible. Two things should prompt Mr Obama. First, the politics of fiscal truth may be less awful than he imagines. Ronald Reagan and Bill Clinton both won second terms after trimming entitlements or raising taxes. Polls in other countries suggest that nowadays tough love can sell. Second, in the long term economics will tell: unless it changes course, America is heading for a bust. If Mr Obama lacks the guts even to start tackling the problem, then ever more Americans, this paper and even those foreign summiteers will get ever more frustrated with him.

And here’s the Economist’s longer story on this issue which includes comparing the Bowles-Simpson co-chairs’ proposal with the Bipartisan Policy Center’s proposal, with this other nice graphic to celebrate “turkey day.”

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4 Responses to “The Economist Magazine on Doing the Seemingly Impossible”

  1. comment number 1 by: rjs

    the turkey drawing is not very proportional…

    http://www.nytimes.com/interactive/2010/02/01/us/budget.html

  2. comment number 2 by: Gipper

    Deficit reduction favors the Democrats. Republicans understand that it is a trap, and they will not walk into it.

    The ideological core of the Republican party (excluding RINOs like Murkowski, Snowe, Jerry Lewis and other ear-mark pandering spenders) has 2 goals: cut government spending and shift programs to the state level. Focusing on merely “reducing” the deficit doesn’t advance these goals.

    Medicare and Social Security cannot be shifted to the state level so Republicans will have to deal with those programs. However, Medicaid, Depts. of HHS, Agriculture, Education, Energy, and everything else not requiring interstate regulation should be eliminated at the federal level and sent to the states.

    As net interest on the debt grows as a proportion of the federal budget, this only helps the Republicans accomplish their mission. At least they hope so. They assume that they can hold the line on taxes going no higher than 18% of GDP. As growing net interest decreases the revenue available for other programs, they believe that Americans won’t tolerate large cuts in SS, Medicare, and Defense. All the other departments will take the major hits. Voila! Program spending is reduced or abolished.

    However, this is predicated on the hope that the electorate won’t consent to future tax increases.

    On the Left, the Krugmans and Pelosis believe that voters will consent to higher taxes to consume more government services. They are willing to engage in the Mexican Standoff with the Republicans and test whose theory is correct.

    They only way to break this impasses is for centrist Democrats to make the first move and offer the Republicans some of the cuts that they covet. Obamacare would have to go. Eventual transition of HHS and Medicaid to state governments could work. NPR and a few other totems of the Left would have to go too. With those trophies, the sensible Republicans could go to their base and argue that increasing tax revenues is a worthwhile deal for getting real reductions in spending, allowing the increased revenues to radically reduce the growth of the deficit.

    Of course, both parties would take joint responsibility for doing what is necessary to curb Social Security and Medicare at a later date. Those programs affect the bases of both parties so they could be cooperative on that venture.

    If Obama could broker this deal, then he would be remembered as a great President who looked at the well-being of the nation, instead of focusing on the vanity of his signature healthcare policy that deeply divided the nation. That’s the kind of pressure that would be needed to force Republicans to break their no-new taxes oath.

  3. comment number 3 by: Jay

    Net private savings has spiked. My question is: How much of the increase in net private savings is related to the financing of the deficit?

  4. comment number 4 by: Jim Glass

    What hope can we place in our politicians doing the right thing?

    Bad news, good news…

    Bad news. Al Gore has admitted that ethanol subsidies were a bad idea in general, bad for the environment in particular, that now that they are in — like any other program after it is “in” — they are near impossible to get rid of … and that he himself fought for them, and indeed cast the tie-breaking vote for them, because “I had a certain fondness for the farmers in the state of Iowa because I was about to run for president“.

    Wow. When the man who wins the Nobel Prize for Protecting the Environment sells out the environment for a few marginal votes in Iowa, what hope is there?

    Good new Andrew Cuomo, the Democrat just elected governor here in NYS, has run TV advertisements *after* being elected promising “no new taxes” and to close the state’s huge budget deficit 100% with spending cuts. Yes, he’s spending money on these TV ads not before being elected, *after*! I’ve never seen such a thing.

    This guy is now head of probably the most “tax and spend” state-running Democratic party in the nation (along with Calif and NJ), and is the son of former record tax-and-spend governor Mario. He’s saying: Taxes are too high, we can’t afford to keep paying our richest, biggest-paying taxpayers to move out of the state. (Maybe he’s seen the report that says after applying the new GAAP rules that require liabilities for health care promises made to state and local employees to be booked a present value, New York has a negative value of tens of billions of dollars.)

    Whatever, when a Cuomo elected to head a NYS Democratic-party-run government *after* being elected pays to run TV ads saying “No new taxes, we must cut spending” … maybe there is some hope after all.