I have now been writing this blog for just over two years. I usually write three posts per week and this one is #280. My top sources for background information are the New York Times and the Wall Street Journal. My own local newspaper, the Omaha World Herald, carries the Washington Post economics journalist, Robert Samuelson, whom I greatly respect.
A column of his discusses a recent report from the Senate Budget Committee prepared by its outgoing chair, Patty Murray (D-WA), entitled “The updated fiscal outlook and its implications for the budget debate next year.” To me this report clearly shows why there has been so little progress made in straightening out the budget over the past few years.
Here are some highlights of the report:
- “Both our current fiscal situation and the outlook going forward have significantly improved, meaning we need a budget approach more focused on jobs and growth, not just on cuts.”
- “Deficits have fallen dramatically over the last five years, and projected debt and deficits have also declined.”
- “Revenue losses due to the recession and slow recovery were significant enough to counteract nearly half of the improvement in projected deficits, which highlights the need for new revenue from the wealthiest Americans and biggest corporations as part of any future deficit reduction effort.”
- “It is clear that we need a federal budget approach more focused on jobs and growth, not on cuts for the sake of cutting. That leaves Republican leaders with a critical choice.”
In my opinion there are two basic problems with Senator Murray’s analysis:
- Deficits have indeed fallen dramatically from their very high level in 2009, but not far enough! Deficits are projected to rise back to 3.9% in just ten years, as shown in the first chart. This means that debt will keep growing indefinitely, as shown in the second chart. This is unacceptable!
- We do badly need to focus on jobs and growth but more deficit spending is not the way to do it. Although immigration reform and expanded trade would help, fundamental tax reform, individual and corporate, is what is really needed to grow the economy.
Hopefully a new Congress will be able to move in this direction next year!
It Does Not Add Up 
You once stated “I am an eternal optimist by nature… .”
Today we got more good news on the economy. The picture today:
— Economic growth is at an 11-year high.
— Job growth is at a 15-year high.
— The stock market is soaring.
— Wages are rising.
— Gas prices are plummeting.
— American manufacturing is improving.
— Obamacare is working.
— Over six million registered for health insurance just in the last month.
— A significant part of the uptick in the economy is increased healthcare spending by consumers that now have insurance.
— The uninsured rate is dropping steadily.
— Actual government deficits are plummeting
— Today you make a post showing how the CBO projections for the debt have been significantly lowered (yet again– as I told you they would).
— The WSJ said “…the U.S. economy looks stronger than it has in more than a decade.”
Seems like fertile ground for an optimist. Yet you find a way to come up with a completely gloomy conclusion.
Your analysis: No mention of any of the above, just continue to scold that the plummeting deficit is “not good enough” because it hasn’t plummeted enough for you.
Talk about straining to find bad news!
Could it be that you’re just unhappy that all of this is occurring without the nation taking any of the measures you deemed critical for all this to happen?
— We did not immediately cut government spending by 10% across the board.
— We did not reduce the deficit to zero in two years.
— We did not repeal any “onerous regulations.”
— We did not engage in any tax reform.
You’ve predicted for the past three years (on this blog and the previous one) that a disaster was imminent if we did not take all those actions. We took none and the economy is doing great– and no one is seeing any disasters in the foreseeable future.
No credit to Obama or those that disagreed with you?
No reflection on your terrible record of prediction?
No admissions of being wrong?
No changing of your point of view?
No modifications of your models and analyses?
Do you still contend that you’re an “eternal optimist?”
“The time to fix the roof is when the sun is shining” – Irish Proverb
Yes, indeed, the economy is finely showing signs of life which is very encouraging. GDP growth for this year is predicted to come in at about 2.5% and to increase to 3% in 2015 (see today’s NYT). This is the best performance since the recession. Let hope that it continues or gets even better.
My point in the above post is that deficits are still much too high and will lead to higher and higher accumulated debt as the charts from the Senate Budget Committee clearly show. Stronger growth will lead to more tax revenue but will also require the Federal Reserve to raise interest rates faster in order to ward off inflation. Higher interest rates on an already enormous debt will greatly add to the deficit and offset an increase in revenue from a faster growing economy.
My dire predictions from several years ago are still pertinent, their effect has simply been delayed by a sluggish economy which has taken much longer than expected to recover.
I know what your point was.
I’m not talking about the position you’ve slyly pivoted to in the last year or so (that it’s the long run debt that’s the problem). It’s too soon to know how that prediction will come out, although you current post shows that it’s already on shaky ground.
I’m talking about your past predictions from 2-3 years ago that a disaster due to high debt was imminent. Right around the corner. Could happen any day. Could not wait for a 10 year plan to eliminate the deficit. It had to be zero within a year or two.
As recently as your May 23, 2013 post, I noted that you routinely used the terms “frightening,” “dire fiscal condition,” “urgent fiscal problem,” “time of crisis,” “critical occasion,” “sorely needed,” “urgent task,” “the gravity of our current predicament,” etc., etc.
You didn’t back down from any of those words, even though I warned you repeatedly over that time that your were wrong on the theory that supported your debt fear-mongering.
Now enough time has passed for the facts to confirm that you had it wrong.
That’s what I’m asking you to account for.
It’s hard to look at the tone of all your posts from years ago and accept the explanation that you were right about everything, the timing is just off.
You were just wrong, plain and simple. And the fact that you think a proverb about when to fix a roof has anything to do with the best time to address the deficit would indicate that you’ve learned nothing from you mistakes.
If you won’t admit that you were wrong, why should we take seriously your new position that we must take action now to avert a “disaster” 10, 20, or 30 years from now?
I did not have it wrong. A solid ten year plan to eliminate the deficit would be represent huge progress but there isn’t one. The Simpson-Bowles plan from several years ago would help a lot but it wasn’t adopted. There’s a ten year sequester plan but it clearly is not enough even if closely adhered to.
The next crisis may be ten or fifteen years off but that doesn’t mean we should just relax in the meantime and wait until it happens. That would be highly irresponsible and do great harm when it inevitably comes. This is true regardless of who is President or who controls Congress. The new Republican Congress now has an opportunity, as well as a huge responsibility, to move us in the right direction. I’m optimistic that it will but I’m certainly not taking it for granted.
We have the capability to solve our debt problem without a new crisis but, first of all, we have to take it seriously. If we are unable to do this, then we are in deep trouble.
Be careful re-writing history– remember, your previous statements are still out there for all to see!
“I will … insist on making real progress. Example: having a ten year plan to balance the budget is no plan at all! It has to happen much sooner with clear and detailed intermediate steps spelled out.” (jackheidel.com, 11/6/11)
And why did you say we had to move so fast?
“We’re in a very, very dangerous economic and political situation. If we don’t put on the brakes real soon we could easily end up like Greece. Germany and France can bail out Greece. But who is going to bail out the US? China? I shudder to think about it! This madness has got to stop. … This sense of urgency is the whole basis for my campaign…” (jackheidel.com, 3/5/12)
Three years out from those prognostications is long enough to see that they were as much hyperbole as they were incorrect.
Do you still contend you did not get anything wrong?
I don’t see a real contradiction here. Three years ago I was in a Republican Primary campaign and we were in our third year in a row of trillion dollar deficits. It was appropriate to call for immediate action. The sequester, a partial solution, didn’t take effect until March 1, 2012.
Now, in late 2014, I am a nonpartisan observer, trying to propose sensible policy, and not getting involved in the political manipulations involved in adopting good policy. Our debt and deficit problem is as serious as ever and still needs to be addressed as soon as possible. The important thing is to adopt a plan that will solve the problem in the near term instead of just kicking the can down the road.