Arnold Kling  

Is the Beast Starved?

PRINT
Tyler on Wage Stickiness: A Qu... Signal and Noise in Economics ...

Tyler Cowen writes,


In many respects, the expansionary phase of big government is coming to an end, and quickly.

...It is not that fiscal conservatives have won a grand battle of ideas, but rather that governments realize that the bills are coming due.

There seems to be more awareness now of what I call the two weeds that have grown in Progressive soil: entitlement spending; and compensation of unionized public sector workers. Greece seems to be an object lesson in what can happen if these weeds are left untrimmed for too long.

The advocates for more fiscal stimulus today are not connecting with the public, which views stimulus as the opposite of clever economics. Many people see larger deficits as imprudent and immoral.

What interests me is the difficulty that our political system has with crafting any sort of budget compromise. For example, I pointed out that an explicit reduction in future deficits could be linked to an increase in near-term deficits, potentially satisfying both Keynesian doves and fiscal hawks. But that is not on the table.

Eugene Steuerle pointed out at lunch last week that there is an adverse equilibrium in politics today. Democrats think that if they agree to spending cuts to reduce the deficit, then Republicans will take advantage of that by passing tax cuts. Meanwhile, Republicans think that if they agree to tax increases to reduce the deficit, then Democrats will take advantage of that by raising spending. The equilibrium strategy is for neither party to compromise on deficit reduction.

At that same lunch, William Niskanen suggested that President Clinton was headed toward proposing real reform of Social Security, moving it in the direction of the Chilean model, but the Monica scandal ended that initiative before it could get started. I guess you could say she sucked all the air out of the room, so to speak. So here we are.

Tyler himself sees the key sentence in his essay as this one:


Finally, effective political ideas are those that can still do good in half-baked form.


Comments and Sharing





COMMENTS (5 to date)
Duracomm writes:

[Comment removed for supplying false email address. Email the webmaster@econlib.org to request restoring your comment privileges. A valid email address is required to post comments on EconLog.--Econlib Ed.]

MernaMoose writes:

In many respects, the expansionary phase of big government is coming to an end, and quickly.

Sure. ObamaCare is proof.

Greece is only the best current example of where we're headed. "We" (as in our fearless leaders in D.C.) have no intentions of avoiding it.

Greg writes:

[Comment removed pending confirmation of email address. Email the webmaster@econlib.org to request restoring this comment. A valid email address is required to post comments on EconLog.--Econlib Ed.]

Boonton writes:

Eugene Steuerle pointed out at lunch last week that there is an adverse equilibrium in politics today. Democrats think that if they agree to spending cuts to reduce the deficit, then Republicans will take advantage of that by passing tax cuts. Meanwhile, Republicans think that if they agree to tax increases to reduce the deficit, then Democrats will take advantage of that by raising spending. The equilibrium strategy is for neither party to compromise on deficit reduction.

This is totally the 'ATM Fallacy'. The equilibrium is much more simplier. Republicans need failure in order to win back seats in Congress & eventually the WH. They will do everything and anything to ensure failure in any way they can.

Unfortunately, 'success' in reducing deficits exists in a void empty of all substance. Trivial acts in terms of long run deficits like voting against extended unemployment benefits allow worried Democrats to brag that they 'made tough calls'. Real deficit reduction, though, exists only in the long term since almost all the deficits exist in the distant future. Yet, ironically, 'success' there is off the table. Bipartisan efforts (like the deficit commission) will be shot down by Republicans who need failure to win.

Individual efforts by Democrats do not play like real deficit reform ("what do you mean you are reducing the growth of Medicare spending by 0.5% over the next 20 years! We don't believe you!!!!" even though such a proposal would slash hundreds of billions off future projected deficits). Such efforts can be attacked by Republicans on two fronts. First they aren't 'real' since they take place in the future (whose to say some future Congress won't reverse them?), they only cut 'growth' in spending etc. Second, they can be attacked by asserting they will 'kill granny', will take away 'our Medicare' for gov't spending etc. Yes its incoherent...if the cuts aren't real how can they hurt granny so much?...but that's the problem. So in order to seem like they are doing something Democrats must do nothing. They slash needed spending today in the name of 'making tough calls' and 'protecting future Medicare'. But no the beast is not being starved, on the contrary he is being fattened up on a lot of empty carbs!

Mercer writes:

There will be no more big programs after Obamacare. The Dems do have a plan to reduce the deficit: slow down Medicare spending. It will be strongly resisted by providers and success is uncertain. The GOP leadership has no clue how to slow Medicare spending other then attack lawyers.

Arnold did you see this article?

http://www.nytimes.com/2010/06/28/business/28union.html?ref=nyregion

Comments for this entry have been closed
Return to top