Like I said last night, we'll have lots to say about Rep Ryan's new (old, really -- he even keeps the same name from last year!) budget as we crunch through the numbers. But the overview is the same: deep spending cuts in programs that support the least advantaged, large tax breaks with unspecified "pay-fors," Medicare gets voucherized after 10 years, the safety net gets blockgranted, and so on.
I can't really work up much outrage here. This is exactly what you'd expect House Rs to rally around, so I'll just hit on a few points worth noting.
-The R's are making a lot of noise about the importance of zero budget deficits, i.e., balancing the budget. Just so you know, there's no economics to that. (I know... shocking!) Yes, you want your deficits to shrink as the economy hits a bona fide expansion, and typically, unless you gut your tax system (which happens to be a big risk with this budget), growth helps a lot with that endeavor.
The math, as I explain here, hinges on getting the deficit below primary balance, because that will nudge the debt ratio (debt/GDP) down. That implies budget deficits below 3 percent of GDP, which, you will note, is not zero.
I re-raise this for a reason. The Senate D's will come out with their budget tomorrow which I suspect will emphasize primary balance over zero deficits. And the R's will bash them for not getting to zero, which has zero economic relevance but may well resonate with the tiny share of people who don't regularly visit OTE.
-I am also reminded today of my absolutely least favorite thing that politicians say about fiscal policy, and there's tons of competition for that slot. It's that good old folksy aphorism, "hey, families have to balance their budgets, so government does too!" Rep Ryan's been going on about that today ("...our budget matches the spending with our income, just like every family and business must do throughout America").
And here it is right out of President Obama's 2013 budget: "Just as families and businesses must tighten their belts to live within their means, so must the Federal Government."
That is just so freakin' wrong. It's the opposite: when families and businesses tighten their belts due to recession, that's exactly when the government takes advantage of the fact that it can run large budget deficits in the interest of temporarily offsetting the private sector demand contraction. Which, of course, is exactly what the White House did, to their credit (believe me, I was there). And, in fact, as just noted, when families and business loosen their belts, that's when you want your deficits to start coming down (be a CDSH as I stress in the link above).
BTW, re the administration's messaging on these matters, no wonder people are confused about all of this when you do X and say "not-X!"
-Next, I thought Jon Weisman of the NYT summarized things pretty gracefully here:
But with his budget -- and a Senate Democratic budget to follow Wednesday -- Republicans and Democrats are setting up a clear contrast between rapid deficit reduction that relies on spending cuts only to reach balance and a slower approach that will mix tax increases and more gradual spending cuts to aim for fiscal stability if not a balanced budget.
I can assure that the economics of an economy trying, with some hints of success, to shift out of weak-recovery mode needs the latter, not the former.
-Talking about confusing messaging, Rep Ryan got interestingly snared this AM in his press conference. He was asked how could he count $600 billion in higher tax revenue from the fiscal cliff deal as part of his plan when he has so intensely inveighed against it? His response, which I found kinda reasonable, was something like: Hey, I'm against it but not going to refight it. It's the law so let's move on.
Which begs the question, thankfully asked on follow-up: Then how do you explain repealing the Affordable Care Act, dude??!!
I won't bother to explain his answer, which was nonsensical.
-Finally, reflecting on Weisman's points above, we're about to scrum around like crazy analyzing two very different budgets that can't possibly be reconciled. Practically, that means that for the near future we'll continue to muddle through with continuing resolutions that just extend current budget levels, debt ceiling fights, and all the rest of it.
My point is that all this talk about how "we must have a budget! -- the Senate hasn't had a budget for years! -- the President's budget is late!" is pretty much nonsense talking points. Do you think House R's are criticizing the President's tardiness because they want to hurry up and implement his budget plan?
I'm not saying these budget documents are pointless. I'm looking forward to seeing what Senate Budget Chair Patty Murray comes up with and agree that it's about time that Senate D's release their budget priorities. But as the Ryan budget, which is really quite divorced from reality outside the hyper-conservative House and has absolutely zero chance of enactment, shows, these budgets have little to do with the actual agreements that determine actual revenues, outlays, and policies. Right now, I'm afraid they're just guideposts pointing the way toward gridlock.
This post originally appeared at Jared Bernstein's On The Economy blog.
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