Arnold Kling  

Two Perspectives on Deficits and Debt

Can you say "rent-seeking?"... More on Mandel, Austrianism, a...

First, from columnist Steven Pearlstein

Two trillion dollars sounds like a lot of money, but in a pinch we could pay it all back in just one year if we were willing to reduce household and government spending by about 15 percent. It would require temporary sacrifice on everyone's part but would hardly be the death of the American dream.

Second, from economist James Hamilton.

If I want to know what an additional trillion dollars in government borrowing or spending will mean for me, I just imagine what it would be like to pay twice as much in federal income taxes for one year.

Pearlstein says we should be happy that the government is doing so much borrowing, because this offsets the rapid de-leveraging of the private sector. I have to admit that my jaw dropped when reading a number of passages in this column.

Ronald Reagan was once called the Teflon president, because nothing bad ever stuck to him. But Obama is the real Teflon president, as Bryan pointed out.

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COMMENTS (6 to date)
KipEsquire writes:

It seems to me that it might be time to switch from trying to debate the debt to trying to debate servicing the debt (now at $470b/yr and rising).

shayne writes:

As an aside, I recall Clinton being referred to as the 'Teflon President', but I don't recall that ever applied to Reagan. (Perhaps I missed it or ignored it back then.)

More to the point ...
I do recall a substantial amount of largely political rhetoric applied to the early Reagan era deficits. I also recall a comment made by a visiting foreign dignitary (Margaret Thatcher, if memory serves) who responded to a question about then deficits from a rather liberal journalist. It went something like this:

Journalist: "Doesn't the size of Reagan's deficits and growing U.S. debt concern you?"

Response: "I can't get overly worried about a U.S. deficit that can be immediately completely eliminated, or a U.S. debt that could be completely retired in 5 years, with the mere imposition of a 50 cent per gallon gasoline tax."

(I haven't checked the validity of the respondent's assertions for that time frame, but I will.)

Today, a quick 'bar napkin' static calculation indicates that even a $2.00 per gallon additional Federal tax would only put about $500 Billion per year of extra revenue against the $1.76 Trillion proposed deficit.

Ready for a $6.00 or $8.00 or $10.00 per gallon gasoline tax everyone?

Bob Montgomery writes:

reduce...government spending by about 15 percent

That's laugh-out-loud funny. Does anyone think there is a snowball's chance in hell of government spending falling by 15% for a year?

tjames writes:

So, Steve Pearlstein is not concerned by goverment spending that could be offset only by fantasies and dreams? What, pray tell, would concern him?

In reality, we, as a nation, would need to produce 2 trillion in goods and services beyond those we consume and then hope to trade all that
for the debt. In one year. Right.

You were right, Arnold, this artcile contained a shocking number of laughers even for a non-economist like myself.

Evelyn Guzman writes:

I am with Steven Pearlstein on this one because there is no other alternative as I see it. So we might as well help those who need help. The financial problem we have took a long time developing; we should at least give that same length of time for the unraveling of this trouble.

Evelyn Guzman
Debt Challenger

Tim Fowler writes:

Evelyn - Re: "because there is no other alternative as I see it"

Why do you think there is no other alternative, or even that all this spending is beneficial?

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