August 11, 2006
Off the cliff...
Mike Plaiss sent a link to a good Bloomberg editorial, If a Deficit Falls in the Forest, Do You Hear It?, by Amity Shales...
...This year, the new report says, the deficit will be $260 billion, or $111 billion less than the CBO estimated in March. For 2006, the government deficit will be 2 percent of gross domestic product, down from the old baseline prediction for 2006 of 2.6 percent. On Aug. 17, when the more extensive annual Update of the Budget and Economic Outlook appears, that 2 percent figure is likely to show up more definitively. But neither the budgeteers' news nor the prospect of a confirmation of it is generating much discussion.
This is surprising. The Economic Report of the President shows the federal deficit for 2004 was 3.6 percent. A narrowing of more than 1 1/2 percentage points in such a short time is itself a story.
The U.S. deficit is worth comparing, for starters, with the data for European nations. In the Maastricht Treaty of 1992, European leaders set a deficit goal of 3 percent of GDP. EU member countries have had trouble meeting that target since...
Indeed, they have had trouble, and will continue to do so. And the people who claim that Bush's deficits are sending us over a cliff will continue to ignore this. But more importantly, figures like deficits are only meaningful in the context of the economy as a whole. (It's insulting to explain this in baby-talk, but there may be liberals in the audience.) If my debts are increasing, but my assets are growing even more rapidly, I'm probably in good shape, as long as I can service the debt. (And if my assets are increasing because of the investments for which I incurred that debt, I'm probably making some smart moves!)
On the other hand, if my assets are not growing, if my income is not increasing, but my debts are increasing, I may be in bad shape!
Situation one is USA. Situation two is EU. Who goes off cliff?
Posted by John Weidner at August 11, 2006 10:51 AMJohn,
I think the folks who worry about the deficit can do the math well enough. I think their problem is that they can't imagine that the US is getting richer. "How can we be getting richer," they cry, "when we don't have universal health care like the Europeans, when we spend so much on a needless/useless/mad-dog military unlike the Europeans, etc., etc., etc."
Part of it is politics-- they're "invested" in declinism. Club of Rome, Ehrlich's The Population Bomb, and all that.
Part of it is because they're getting older-- it seems to me that most of these people are Boomers, people for whom the high point of their lives (and by extension, the nation's life) occurred sometime around 1970, and things have been going to hell in a handbasket since. (I'm not entirely unsympathetic on that last point. I'm human too, and wonder where my 20s [the 1980s] went.)
And then you have some folks who are merely clueless. I love my mother very much, but sometimes she says things that are just so far out in left field..... One day, some years ago (1992?), Dad, Mom, and I were eating lunch in my parents' kitchen, with the TV in the corner tuned to an episode of Perry Mason (made around 1960). Perry was (as usual) defending some poor soul facing a charge of murder, this time over a $100,000 inheritance. Mom gets this speculative look on her face, and muses aloud, "A hundred thousand dollars? What would that be today? Maybe $150,000?" Dad and I look at each other in utter disbelief, turn as one to Mom, and say, "Huh??" I don't know what was going through Dad's mind, but I couldn't believe that Mom, who handled the family's household finances, could be so clueless about a third of a century's worth of inflation.
So have some patience and sympathy. They'll either "get it" (as Mom finally has), or they'll simply become dinosaurs that no one listens to, or they'll simply die off as the years pass.
Posted by: Hale Adams at August 11, 2006 04:31 PM
