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Here’s a letter that a bunch of budget-world VIPs and otherwise very “Honorable” people–oh, and my “non-honorable” self snuck in somehow–sent to President Obama and Congressional leaders today.  Kind of a simple plea: would you please start leading on fiscal responsibility instead of just standing there, fighting over which side or corner is the more fiscally irresponsible?  Or instead of just sitting there, feeling helpless about what to do because the problem is so large and your political selves so entrenched?  Here’s the text of the letter:

Dear President Obama, Speaker Boehner, Minority Leader Pelosi, Majority Leader Reid, and Minority Leader McConnell:

As you continue to work on our current budget situation, we are writing to let you know that we join with the 64 Senators who recently wrote that comprehensive deficit reduction measures are imperative, and to urge you to work together in support of a broad approach to solving the nation’s fiscal problems. As they said in their letter to President Obama:

“As you know, a bipartisan group of Senators has been working to craft a comprehensive deficit reduction package based upon the recommendations of the Fiscal Commission. While we may not agree with every aspect of the Commission’s recommendations, we believe that its work represents an important foundation to achieve meaningful progress on our debt. The Commission’s work also underscored the scope and breadth of our nation’s long-term fiscal challenges. Beyond FY2011 funding decisions, we urge you to engage in a broader discussion about a comprehensive deficit reduction package. Specifically, we hope that the discussion will include discretionary spending cuts, entitlement changes and tax reform.

By approaching these negotiations comprehensively, with a strong signal of support from you, we believe that we can achieve consensus on these important fiscal issues. This would send a powerful message to Americans that Washington can work together to tackle this critical issue. Thank you for your attention to this matter.”

We agree with this letter and hope that you will work together to agree on a comprehensive, multi-year debt stabilization package.

To see the full letter including the complete list of signatories, go here.

A friend of mine sent me a link to Matthew Kahn’s latest guest blog post on the Christian Science Monitor website; she sent it along with an “I believe in you” sort of note, because as Matthew was implicitly pointing out, I am not on the list of top economists to which he refers–while he is (as he explicitly points out).  He ponders (emphasis added):

REPEC provides an objective measure of who is “Royalty” in the economics profession. The current list of the top 5% is here. I am ranked #681 out of 27,365 economists so that’s not bad (and my 3 books aren’t counted here). But, here is the interesting part. There are 52 women who rank in the top 1000 and 0 of them blog. Contrast that with the men. Consider the top 100 men. In this elite subset; at least 8 of them blog. Consider the men ranked between 101 and 200. At least, six of them blog. So, this isn’t very scientific but we see a 7% participation rate for excellent male economists and a 0% participation rate for excellent women. This differential looks statistically significant to me. I have searched for Nancy Folbre among the top 1369 economists (the 5% cutoff) and she is not counted in the elite subset.

Not being a female economist himself, Matthew then theorizes–as men love to do–about why we women aren’t as able to be both “excellent” economists and blogging economists.

I find it ironic that Matthew’s blog post would appear on the Christian Science Monitor site in the same area that my guest blog posts do, and that the photo that goes with the CSM post is of…an Asian woman!  (Ok, a much younger Asian woman, but Asian nonetheless.)  Huh!  There’s a female economist blogger blogging right “next” to Matthew, right under his nose!

Oh, but I’m not an “excellent” female economist.

I think we female economists have our own empirical (not just theoretical) reasons why those of us who blog aren’t the same people as those of us who are at the top of the REPEC list.  In my case, it’s also closely related to why those of us (even non-excellent female economists) who blog don’t typically blog at the same frequency as the (even most excellent) male economists who blog.  It’s called we have and care about other things and people in our lives, not just our own individual, introspective views about how the supposed world around us supposedly works (in our own opinion)!  And that’s even things and people other than what Matthew counts so endearingly as the “home production” sort of things–you know, “cooking and rearing children.”

But yes, we female economists who happen to have families do typically end up doing most of the home production, as our typical husbands who are typically other economists typically are oblivious to what needs to get done.  You know, because the guys are so busy thinking their own deep, important thoughts about how the world swirling around them works, while in theory the guys are convincing themselves that they are the better, more successful, more “excellent” economists (or whatever they are professionally which they confuse with what defines them personally).

Which is why it should not be too hugely shocking that this particular non-excellent female economist who used to be married to an “excellent” male economist (top 5%, like Matthew!), is no longer married to that economist.

Objective, standardized statistics don’t always very accurately or comprehensively measure the quality (or “human capital”) of an economist–or a college applicant, or an economy as a whole, for that matter.  (I am working on a new column on this point for the Christian Science Monitor right now, actually.)  It’s actually part of a broader question and answer about why there aren’t more women in economics more generally (leaving aside whether they blog or not), or in other very quantitative fields for that matter.  It’s not just because we’re worse at math, by the way, because we’re not.  (Let me mention that my oldest daughter, now at Princeton, got a perfect math SAT score.)  It could be because we women often find disciplines that assume everything can be objectively, precisely, formulaically valued, very limiting at best and maybe downright wrong at worst.

And as to why this particular non-excellent female economist blogs, I’ve written about that before in a newsletter of the American Economic Association’s Committee on the Status of Women in the Economics Profession (CSWEP).  But perhaps this very blog post might make for more entertaining reading for CSWEP members than that column did. 

To all you other “non-excellent” female economist bloggers, let me hear from you here!  Are we really not as “excellent” as our male counterparts?  Really?!

Ezra Klein has a really excellent column on war costs in today’s Washington Post (Business section).  His essential point is pretty much a central philosophy here on EconomistMom.com:  if we behave as if there are no budget constraints (yet there really are underlying tradeoffs among scarce resources that we just choose to ignore), we’re almost certainly going to make poor choices where marginal benefits fall short of marginal (and true) costs.

Some of my favorite parts of what Ezra has to say (emphasis added):

[F]or more than a decade now, we’ve waged war as if it were free, keeping our wars off the budget and, rather than paying for them as they were fought, slapping them on the national credit card. Paying as you go, after all, is hard. It forces you to make decisions about competing priorities. When you don’t pay up front, those decisions become easy. And war should never be easy...

Honest budgeting serves a purpose beyond making sure revenue matches spending… The numbers on the page — and the trade-offs they demand — are as close to rational as the political process can get. That’s the point of them. By forcing us to make the tough decisions, they help us make good decisions…

The Obama administration has improved the process some, mostly by asking for war funding when the budget is submitted (although the funding itself is still classified as “emergency” spending, and so is not actually ruled by the budget process), including some funding in the budget and more tightly defining what can go into the emergency packages so they don’t simply become budgeting by other means for the Pentagon. But the wars are still charged to the credit card and the Pentagon is still protected from trade-offs.

Even some within the armed forces worry about the Defense Department getting used to this system. Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, gave an unusually frank news conference in January. “The budget has basically doubled in the last decade,” he said. “And my own experience here is that in doubling, we’ve lost our ability to prioritize, to make hard decisions, to do tough analysis, to make trades.”

By its very nature, war poses difficulties for the budget process. For one thing, its costs are at least partly economic, but its benefits often are not. The fact that saving the lives of thousands of Libyans won’t reduce the deficit doesn’t mean it’s not a good thing to do. Moreover, budgeting is about planning, and war is hard to plan for. It often starts unexpectedly, and it frequently ends unpredictably. We don’t know how long a war will last, or if it is known, we might not want that information public. But difficult is not the same as unnecessary.

“The whole point of budgeting is to provide transparency,” [Harvard budget expert Linda] Bilmes says. “It’s the place where we see where our real priorities are.” By refusing to budget for war, our leaders aren’t saying that the safety and security of the United States is our top priority. They’re saying that they’re worried the conflict really isn’t our top priority and that if asked to pay for it, the American people would think other budget priorities more pressing. But those are choices we need to make. Because we spent trillions of dollars in Iraq, it couldn’t be spent on better ways to improve the strength and security of the United States. Refusing to make choices when it comes to war is, in itself, making a choice — and not a wise one.

The same point could be made with any other part of the federal budget that we currently give (and for a long time have given) a “pass” to when it comes to paying for it.  If it makes sense that we ought to be evaluating whether the wars that preserve freedoms and save lives are worth their cost, then certainly we should have applied that test to the higher physician payments under Medicare or the extended Bush tax cuts–things that mostly “preserve” and “save” the after-tax incomes of higher-income households–a long, long time ago.

I’ve had a couple columns in the Christian Science Monitor over the past month, both making the basic point that the fiscal woes we’re in have a lot to do with our failure to behave like grown-ups when it comes to recognizing and admitting our own roles in the problem and doing something to be part of the solution even when it isn’t all our own fault.

• This week’s column suggests kindergartners could do a better job at cutting the deficit.  The CSM editors added that flourish/slight exaggeration, but I actually think older grade schoolers could do a better job–particularly those fortunate enough to be exposed to some economic concepts such as “opportunity cost” and “budget constraints” (the notion of scarce resources) in their social studies curriculum.  And of course, older grade schoolers have also mastered basic addition. 

• My prior print-edition CSM column came out about a month ago and elaborated on a point I first made up on the fly at an Urban Institute event (mentioned on my blog here): the federal government’s “spending spree” is really like a shopping mall phenomenon in “intergenerational reverse”–that is, we expect our kids and grandkids to put all our own benefit and tax cut goodies on their “credit card,” and we give them nothing of decent value in return.  Not fair. 

Both point to our need to “grow up” about the budget deficit.  Help!  Where’s the “fiscal therapy” we need to snap out of this deficit dysfunction?!!

Immediate addendum/update:  The Ramones song “I Don’t Want to Grow Up” seems very fitting…video above, lyrics here (emphasis and a side-comment added):

When I’m lyin’ in my bed at night
I don’t wanna grow up
Nothing ever seems to turn out right
I don’t wanna grow up
How do you move in a world of fog that’s
always changing things
Makes wish that I could be a dog
When I see the price that you pay
I don’t wanna grow up
I don’t ever want to be that way
I don’t wanna grow up
Seems that folks turn into things
that they never want
The only thing to live for is today…
I’m gonna put a hole in my T.V. set
I don’t wanna grow up
Open up the medicine chest
I don’t wanna grow up
I don’t wanna have to shout it out
I don’t want my hair to fall out
I don’t wanna be filled with doubt
I don’t wanna be a good boy scout [no "be prepared!"]
I don’t wanna have to learn to count
I don’t wanna have the biggest amount
I don’t wanna grow up
Well when I see my parents fight
I don’t wanna grow up
They all go out and drinkin all night
I don’t wanna grow up
I’d rather stay here in my room
Nothin’ out there but sad and gloom
I don’t wanna live in a big old tomb on grand street
When I see the 5 oclock news
I don’t wanna grow up
Comb their hair and shine their shoes
I don’t wanna grow up
Stay around in my old hometown
I don’t wanna put no money down
I don’t wanna get a big old loan
Work them fingers to the bone
I don’t wanna float on a broom
Fall in love, get married then boom
How the hell did it get here so soon
I don’t wanna grow up

Incidentally, when the Ramones performed this song on David Letterman’s show (1996), we were headed toward a (brief) period of budget surpluses.

Following up on my post from last Friday on CBO’s analysis of the President’s budget, let me explain that the Obama Administration’s seemingly low-ball estimates of deficits under their own proposals isn’t so much a case of (very) “dynamic scoring” as a sort of “make-up call.”

I thought I’d provide some apples-to-apples numbers to help see what’s going on.  Recall that CBO scores the ten-year deficit under the President’s proposals at $9.470 trillion, while OMB (the Administration) says it would be only $7.205 trillion–a more than $2.2 trillion difference.  It turns out that most of this difference is due to the Administration’s much rosier assumptions about the pre-policy baseline and the level of revenues that would be collected under current law.  The CBO and OMB estimates of the cost of the President’s tax proposals (or more accurately, the net revenue loss under the President’s budget compared with current law) are actually very similar.

So here are the relevant numbers, all for the ten-year period of fiscal years 2012-21. The CBO numbers come from their analysis linked above, and the OMB numbers come from the summary tables in the President’s budget:

• CBO (all found in their Table 1):
  • Revenues under the current-law baseline:  $39.032 trillion;
  • Revenues under the President’s FY2012 budget:  $36.702 trillion; so…
  • Difference (net revenue cost of President’s proposals):  $2.330 trillion.
• OMB:
  • Revenues under their “adjusted” baseline (from their Table S-3):  $37.928 trillion;
  • BUT this adjusted baseline took out $3.070 trillion in extended tax cuts that they count as “current policy” (see Table S-7); so…
  • Implied revenues under current law (add the $3.070 trillion back in):  $40.998 trillion;
  • Revenues under the President’s FY2012 budget (from Table S-1):  $38.747 trillion;
  • So, note, difference from current law due to the President’s proposals ($40.998 - $38.747): $2.251 trillion.  (Pretty darn close to CBO’s $2.330 trillion–only $79 billion (over ten years) apart.)
• Difference between assumed current-law baseline revenues (OMB minus CBO):  $1.966 trillion.

So, out of the $2.2 trillion difference between CBO and OMB estimates of ten-year deficits under the President’s proposals, nearly $2.0 trillion comes not from differences in their cost estimates of the tax-cut proposals nor from differences in how effective those tax cuts might be in growing the economy/changing the economic forecast (”dynamic scoring”–which isn’t done in these budget forecasts anyway), but rather from the differences in how strong they think the economy and therefore the levels of revenues would be even with no change in tax policy.

So it’s not anything sneaky or sinister buried in the Administration’s estimates, but it’s just a very optimistic view, for sure, and it certainly serves as a sort of “make-up call” in that the $2.0 trillion in “rosier scenario” effectively covers about 85-90 percent of the cost of President Obama’s proposed extension of what used to be the (Obama-labeled “fiscally-irresponsible”) Bush tax cuts.

The GAO just released its update of their long-term fiscal outlook report.  The figure above shows federal spending (the bars) and revenue (the line) under GAO’s “alternative” scenario, which is closely related to the Concord Coalition’s “plausible baseline” which assumes–more pessimistically but probably more realistically than current law–that most of the expiring tax cuts are extended and that discretionary spending grows at the same rate as the economy (GDP) rather than only with inflation.

Just by the way, note that the President’s proposed budget is much closer to this “alternative”–and to the higher associated deficits–than to current law.  (More on that point and elaborating on what I said on Friday about CBO’s analysis of the President’s budget soon.)

My immediate interest in putting up the chart above from the GAO report is that many people like to point to this picture (or very similar pictures) as evidence that the current deficit and longer-term fiscal gap is a “spending (only) problem” and not a revenue problem.  The revenue line doesn’t droop after all, even in this worse-if-not-worst case scenario where current deficit-financed tax cuts are permanently extended.  And the spending bar just keeps on growing.

But note by 2040 we will only be collecting enough revenue to cover the costs of net interest and not quite all of Social Security.  Note that we don’t have a choice about cutting out net interest as long as we’ve continued accumulating the debt that interest pays for.  Note that net interest is by far the fastest-growing component of spending and comes to dominate not just Social Security but both all of discretionary spending (actually, all other spending besides the programs mentioned) and Medicare and Medicaid combined.  And note that even if it is judged by many to be a “spending problem” (only or mostly), it’s nearly impossible to imagine squeezing all the spending our society will still view as essential over the next few decades under that very low (but “historically average”) revenue line–or how we will decide what doesn’t make the cut, when the wiggle room beyond net interest is so very tiny and getting smaller by the minute.

The Congressional Budget Office’s (preliminary) Analysis of the President’s Budget just came out.  Will have more to say after a more careful read this weekend, but a few things immediately jump out from the main tables in the report:

1. Deficits under the President’s budget proposals as estimated by CBO are more than $2.2 trillion higher than estimated by the Administration.  (Ten-year deficits are $9.470 trillion according to CBO, vs. $7.205 trillion according to the Administration’s Office of Management and Budget.  See bottom lines on Table 3, page 18.)
2. CBO estimates the total cost of the President’s proposals to be $2.733 trillion over ten years.  The great bulk of this (85%) is the cost of proposed tax cuts, at $2.331 trillion–without including any additional interest costs associated with these tax cuts.
3. In fact, if you decompose the cost of the spending proposals into mandatory, discretionary, and net interest effects, you find that the contribution of tax cuts is more than 100 percent of the total cost. Again from Table 3, the President’s mandatory proposals cost $1.335 trillion over ten years, and his discretionary proposals save $1.452 trillion over ten years, for a net $117 billion in savings without interest.  In other words, the higher net interest costs of $519 billion over ten years are due entirely to the deficit-financed $2.3 trillion in new tax cuts.
4. It is only coincidental that the difference between CBO’s estimate of deficits under the President’s proposals and the Administration’s (OMB’s) own estimate ($2.2 trillion) is almost identical to CBO’s estimate of the cost of the tax cut proposals ($2.3 trillion).  But it effectively means that through the Administration’s rosier assumptions (which I hope to investigate further), they are implicitly suggesting–or at least not contradicting–the notion that tax cuts pay for themselves.  On the Administration’s part there seems to be some implicit denial about what this tax-cut-monopolized budget means for the deficit.

Oops!  Somehow this doesn’t seem like a very good start on our path to fiscal sustainability.

Today the Concord Coalition released this issue brief on the challenges confronting House Budget Committee chairman Paul Ryan.  The bind that Republicans are now in is that, despite having complained about the fiscally-irresponsible Democrats’ health reform bill which they claimed was a “jobs killing” and “deficit increasing” one, now few if any of them–now that they’re in charge–seem willing to come up with their own specific proposals to actually cut Medicare spending.  (Another “bind” they’re in relates to the No New Taxes pledge–also inconsistent with deficit reduction despite what Grover Norquist likes to rant about.)

The Republicans’ bind over health reform reminds me of the bind that the Obama Administration and congressional Democrats got themselves into over the “fiscally-irresponsible” Bush tax cuts that they argued were responsible for the huge deterioration in the budget outlook. Once those Democrats were put in charge, we quickly realized that even they weren’t actually willing to let go of those fiscally-irresponsible (then-)Bush(-now-Obama) tax cuts.

So what kind of budget would Ryan need to write that would honor his stated commitment to deficit reduction?  As the Concord issue brief concludes (emphasis added):

So the dilemma is plain. A budget that uses honest numbers and reflects Republicans’ current policy preferences will result in large continuing deficits with growing debt and growing interest costs. On the other hand, a budget that shows greater progress on reducing the deficit will, of necessity, require an openness to changes that Republicans have been reluctant to put in play such as defense cuts, revenue increases and entitlement reforms that could affect current beneficiaries.

Ideally, the Republicans will take this second route — acknowledging the unpleasant realities of the federal budget and presenting the serious and specific fiscal reform plan that they have promised the American public.

A good place to start would be to give closer consideration to the recommendations of the bipartisan Bowles-Simpson and Rivlin-Domenici commissions. They put everything on the table, including defense cuts and tax reforms that increase revenues by limiting tax “entitlements” — federal subsidies administered through the tax code. The commissions also include savings from Social Security and Medicare reform, but for those programs the focus must be on cumulative savings stretching beyond the 10-year window.

Republicans have criticized the President for failing to incorporate more of the policy recommendations of his own fiscal commission in his proposed budget. The question now is whether they will do any better.

In fact, the greatest area of overlap between the Obama Administration’s budget and the Republican budget is likely to be their common lack of any of the most fundamental and significant solutions as recommended by any of the fiscal commissions/task forces/study groups.

I think Ezra Klein shows remarkable restraint in his interview of anti-tax activist Grover Norquist in today’s Washington Post.  There’s something very scarily familiar about Grover’s “winning” view of the (fiscal policy) world he works within.  The “best” answer is his last (emphasis and endnotes added):

GN: The goal is to reduce the size and scope of government spending, not to focus on the deficit. The deficit is the symptom of the disease. And there are several reasons to oppose tax increases.

First, every dollar of tax increase is a dollar you didn’t get in spending restraint.[1]

Two, you walk into the Democrats’ Andrews-Air-Force-Base, Lucy-with-the-football trick for the third time in a row.[2]

In ‘82 and ‘90, the Republicans were smart, tough, focused guys. They were taken to the cleaners. The Republicans negotiating with the Democrats are negotiating with Dick Durbin. Durbin. Durbin! Does Durbin have an interest in cutting any government program in the history of the world at any time in his life? No. Never. He’s there to sucker Republicans into putting their fingerprints on a tax increase so when you go into an election, people say, “Can’t trust them. They’ll raise taxes.”

The reason it won’t happen is that the Republicans have taken the pledge and made a promise to their constituents that they won’t increases taxes.

No, there won’t be a tax increase. That’s not happening. It’s an odd way to spend your time. I think golf and cocaine would more constructive ways to spend one’s free time time than negotiating with Democrats on spending restraint.[3]

[1] No, every dollar of a tax cut or tax increase avoided is another dollar of spending that we’ve deficit-financed and hence made seem as if “free.”  Until we force spending increases to be offset by increased taxes, (even) Republicans have little incentive to control spending.

[2] I don’t exactly get this analogy, but Grover sure seems to be channeling Charlie Brown here.  (Hmmm…a little bit insecure and paranoid, perhaps?)

[3] So does cocaine explain Grover’s (fiscal policy) world view?!

I also find it interesting how throughout the interview Grover manages to attack and/or insult just about everybody, including the conservatives/Tea Partiers he’s trying to woo. (Catch the reference to guns and home-schooling.)

I mean, let’s just call a crazy a crazy.

“Winning” is not possible for us if we allow losers like this to sway public opinion and policy.

Ezra Klein so aptly wonders whether John Boehner is more likely to lead on the solution or to continue to be a big part of the problem:

Remember Boehner attacking Democrats for holding ”a press conference to pat themselves on the back for ‘protecting’ Medicare, even though their government takeover of health care bill would cut seniors’ Medicare benefits by $500 billion”? Remember how he ended that statement? “Are you kidding me?”

Which gets to the real issue here: the public isn’t so much resistant to deficit reduction as receptive to demagogic attacks on the sort of policies needed to reduce deficits — including the ones we’ve already passed into law. Boehner has proposed some sort of truce on these issues to Obama — the president responded “positively,” Boehner said — but it’ll be the terms and strength of that detente, not whatever happens at constituent workweek, that’ll decide whether we get to a deal. And to a lot of Democrats, Boehner’s offer sounds a bit suspect: the GOP, having won the election in large part by hammering Democrats for Medicare cuts, wants an agreement to end criticism of Medicare cuts right before they propose some of their own. It’s got a very “do as I say, not as I do,” feel to it.

If Boehner is going to convince Democrats that this is good faith rather than crass calculation, he’ll need to go first. One way to start? Adopting a more balanced and honest take on the Affordable Care Act. No more calling the bill “job destroying” because it makes people richer and makes it easier for early retirees to buy health care on their own. No more attacking the bill for being both fiscally irresponsible and for cutting Medicare and taxing high-value health-care plans. The truth is, the Affordable Care Act does more to control costs in Medicare than any single piece of legislation we’ve ever passed. If Boehner is so serious about a new tone and an educational discussion over entitlements, then it’s time for him to admit that.

It seems to me that for all the talk about the need for “adult conversations” about the budget deficit, we continue to see immaturity on the issue from all the political sides of the debate:  temper tantrums about the small stuff, denial over one’s own role in the mess, bullying and finger-pointing about it being the other side’s fault, clinging to fairy tales and fantasies (such as about deficit-financed tax cuts or investments paying for themselves), ignoring advice we don’t like (even that we have ourselves asked for–i.e., the fiscal commission), and shirking our duties as the parents to our kids (by letting the debt continue to pile up).  There’s a huge amount of psychological dysfunction among our leadership right now.  How can we get anywhere with deficit reduction if there aren’t any adults in charge?  Where is the analogous miracle-worker (fiscal) therapist–if even Alice hasn’t yet proven to be the one?

(Addendum:  Perhaps CBO director Doug Elmendorf is the “therapist” Congress needs.)