Wednesday, August 26, 2009

Don't worry about the deficit, silly goose.

It has come to my attention that still other people are stupid on the internet. Noam Scheiber is one of them. I'm on a roll.

So what should we make of today’s other economic announcement--that the 10-year deficit projection has climbed to $9 trillion from just over $7 trillion earlier this year? Short answer: Not too much.

Yeah, what's a 28% inaccuracy rate in forecasting? Only a number larger than the profit margin for every single company in American. No big whoop.

As the OMB fact-sheet accompanying the release points out, the reason for the bulk of the $2 trillion increase is that the recession was deeper than expected,

Which, the people who did the "expecting" are still in office. Of course, that's why you're telling us to calm down, lest we hold anyone accountable.

which led to far greater spending on “automatic stabilizers” like unemployment insurance and lower tax bills.

Which, combined, not nearly $2 trillion.

And, of course, bigger short-term deficits require more debt, which creates higher interest payments that further drive up the long-term deficit.

That's not scary at all.

The biggest concern would be that foreign creditors--especially the Chinese--might clam up and slow their purchases of U.S. Treasury bonds, fearing that the deficit has become unsustainable.

Which would cause a de-stabilizing collapse, thusly giving China status as the world's only real superpower.

That could raise interest rates and sabotage the recovery.

Dude, there is no recovery to sabotage. Other nations: recovering. America: not.

I’m actually wrapping up a piece on the U.S.-China economic relationship this week, and several Treasury officials have told me that, during the recent Strategic and Economic Dialogue, the Chinese confided that they would have been more concerned about the deficit had we not responded aggressively to the recession,

So, administration officials are telling you that China said things would have been worse if the administration had not acted. Of course, the word of the Chinese is gold, especially when synthesized through self-serving political spin. I'm feeling so much better now.

The Chinese understood the importance of running a big short-term deficit to offset our economic shocks and restore growth, these officials say.

I love the fact that we are deferring to the economic wisdom of a communist, fascist country.

And the Chinese were apparently reassured when administration economic officials explained how much of the short-term deficit was a function of the recession and the financial crisis (about two-thirds).

What the hell else would have caused it? Oh, you weren't secretly spending $5 trillion on a time machine? Because that's what we thought.

Despite the ugly top-line numbers, that hasn't really changed--there isn't much reason to be more pessimistic about the long-term structural deficit than we were beforehand.

You just cited 2 trillion reasons.

Politically, there will obviously be some attempt to incorporate the new numbers into the case against Obama’s domestic agenda.

On account of it has cost about $2 trillion.

As OMB director Peter Orszag told the Times’ Edmund Andrews this morning, “A lot of people will look at this deficit and say we cannot afford health care reform.”

At this point, if you are still for Obama's health plan, facts are not going to be persuasive. That said, yeah, we cannot afford health care reform.

But I’d caution against over-emphasizing the implications of the new deficit numbers for health care reform.

That's because you support health care reform.

For one thing, from the perspective of creditors like the Chinese, health care reform at least gives you a chance at reining in long-term, structural deficits.

Not when it creates long-term, structural deficits, which it obviously will, which is why we can't afford it.

(The savings may be speculative and far off in the future, but the alternative is the certainty of zero savings, which isn’t appealing given that health care costs drive so much of the long-term deficit.)

This is stupid. There are no speculated savings, on account of there are speculated expenditures. Those savings exist in the imagination of one Barack H. Obama and his cult of devoted followers. In terms of real data, which, presumably, the Chinese use to make financial decisions, health care reform will drive the deficit upward.

Meanwhile, domestically, the administration’s biggest problem on health care isn’t that it costs too much, but too little.

This, folks, is how liberals approach economics, and also why I am not a liberal.

That is, the administration’s insistence that health care reform has to be deficit neutral over 10 years, along with its preference that much of the financing come from within the health care system, has allowed critics to scare seniors with talk of rationing and death panels--the argument being that the savings used to pay for health care reform are going to come from Medicare recipients, etc., etc.

In other words, the efforts to scare seniors are founded in the reality of the proposal. Thanks for ceding that ground.

Now obviously the administration wouldn’t have adopted that constraint if it hadn’t been worried about taking flak on the deficit.
Obviously, huh? Historically speaking, deficit concerns take a back seat to other, more urgent concerns. Like, for example, the economy. The administration adopted "constraint" because it wanted to pretend that this reform package will stimulate the economy.

But the effect of the deficit here is really second-order:

But you just said that it...

The deficit constrained the administration's thinking about health care in ways that subsequently made its plan vulnerable to other criticisms;
That it represents a step toward Socialism? Yeah, if only the plan were larger and more ambitious. That would have assuaged our worries.

the direct effect on the prospects for health care reform--i.e., people flatly insisting we can’t afford it--hasn’t been nearly as damaging. I'd guess that will more or less continue to be true despite the new numbers.

And so, in conclusion, we shouldn't worry about the deficit. Way to summarize your thesis, dude.


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