I don't know whether to slap my forehead or rub my temples

From a front page NYT article:

Mr. Obama has published the 10-year numbers in part, it seems, to make the point that the political gridlock of the past few years, in which most Republicans refuse to talk about tax increases and Democrats refuse to talk about cutting entitlement programs, is unsustainable.

Arrrrrggggggg! This is just not true. Health care insurance reform was projected to reduce the deficit by, among other things, raising revenue and cutting back somewhat on existing Medicare entitlements for seniors. And if the liberals had really had their way, and included a robust public option, the deficit would have been cut far more substantially. (All this according to the CBO!)

Meanwhile, it has been the Republicans who have been promising not to cut Medicare, not the Democrats. And it is the Republicans who passed the unfunded expansion of Medicare, the unfunded tax cuts, and financed the unfunded wars of the Bush years.

So the real story is that it is the Republicans who are overwhelmingly responsible for the unsustainable levels of debt that our nation finds itself in. But in the mainstream press you always get the "both sides are to blame" narrative.

Props fail in California

Predictably, voters rejected myriad propositions that would have closed the budget deficit by, among other things, taking money away from services such as mental health and early development programs. The reason, I think, is because most voters are liberals and would like to see higher taxes for more services.

Of course, despite this, the legislature can't ever pass a tax increase, because such bills require a 2/3 supermajority, and so a small coterie of hard-core conservatives are able to squelch it every time.

The budget situation is only going to get much worse from here. But I like it that way. I want there to be a budget meltdown. Because this is the only way we're ever going to force meaningful reform of the screwed-up budget process in this state.

No more 2/3 supermajority! No more budgets by referendum!

Medicareandsocialsecurity

As Ezra Klein likes to point out, when people talk about the long time fiscal liability of "Social Security and Medicare", it's pretty misleading, because the problem is overwhelmingly with Medicare--specifically, the rising costs of healthcare which is causing it to bust the budget.

For example, check out this excerpt from the Economist:

Mr Bush’s biggest failure, however, is on entitlements. The ageing of the population, coupled with rapidly rising health-care costs, means that in coming decades Social Security and Medicare benefits will outstrip workers’ payroll contributions by trillions of dollars.

...

Between the Medicare drug benefit and the failure to restore solvency to Social Security, the long-term unfunded cost of America’s programmes for the elderly had last year reached a stratospheric $43 trillion, or 5% of future wages, compared with $13 trillion, or 3% of future wages, in 2000.

From this it sounds as though both entitlements are more or less equally to blame for the looming budget crisis. But when you look at the chart that the Economist itself provides, you see a different story:



Believe it or not, those numbers on the right vertical axis are trillions of dollars. Even so, it is easy to see that the trouble is not with Social Security, the costs of which are actually quite stable--it's with Medicare (and the drug benefit), the costs of which have more than doubled over the last eight years (and are continuing to rise precipitously). Conservatives tend to lump the two entirely separate entitlement programs together because it serves their ideological aversion towards entitlement spending in general, but it's important to understand where the real budgetary problems are, and why healthcare reform that reduces healthcare costs is so necessary.

A time to spend

Says Krugman:

It’s now clear that rescuing the banks is just the beginning: the nonfinancial economy is also in desperate need of help.

And to provide that help, we’re going to have to put some prejudices aside. It’s politically fashionable to rant against government spending and demand fiscal responsibility. But right now, increased government spending is just what the doctor ordered, and concerns about the budget deficit should be put on hold.

It's somewhat counterintuitive but true: federal deficit spending is good in a recession, because it gets money flowing in the economy. Moreover, since lenders have lost confidence in the private banks, they all want to lend to the federal government--even if it means lending at an interest rate of a fraction of a percent. So the government essentially has a credit card with a hyper-low interest rate of, like, 0.15% that it can use to get money flowing in the economy in various ways: by increasing unemployment benefits, by cutting taxes, and by investing in infrastructure improvements. The idea is that you keep spending until the economy recovers, at which point tax revenues also recover and you can balance the budget and pay down the debt.