Just some more economists that don't understand economics. Or, more accuratley, economists that forgot their economics after they left the Bush White House, right?

Here's what Greg Mankiw, former Bush CEA Chair,thinks about Bush's Budget Deficits now.

Quote :

"As anyone who has looked at the numbers knows, the federal government’s current budget deficit is, in a sense, only the tip of the iceberg of the fiscal problems to come. The federal budget is on an unsustainable path. When the baby-boom generation retires and becomes eligible for Social Security and Medicare, all hell is going to break loose. The policy options aren’t pretty—either large cuts in promised benefits or taxes vastly higher than anything ever experienced in U.S. history. The stalemate over Social Security reform that we have seen over the last year suggests that the Washington establishment is not ready for the bipartisan consensus that will be necessary to put the budget on a sustainable path. "

http://gregmankiw.blogspot.com/2006/04/how-to-increase-national-saving.html

[Edited on April 22, 2006 at 10:19 AM. Reason : ``]

4/22/2006 10:16:00 AM

Maybe he means the budget is on a path that is unsustainable if we want to keep taxes and the deficit at current levels.

4/22/2006 10:26:50 AM

Yea, it's kinda like saying "This lane ends 15000 ft"
Just change lanes before that and everything is rosy again.

4/22/2006 10:41:29 AM

i saw greg at kanki last night

good times

4/22/2006 10:43:32 AM

^
haha hell yes. you should have heard some of the commentary at the dinner table ("OMG that was marko!!!")

Socks`` -- tell me again how this is different from anything he's said in the past? Basically Social Security and Medicare are fucked. W's been saying that since he took office.

But at any rate, glad to see you endorse Mankiw's commentary. I trust that means you're now endorsing Social Security privatization...

4/23/2006 4:08:46 PM

Yah, W's been saying a lot about the budget. But not really doing much. Huh? And if W has been saying Medicare is headed for the shitter. Why decide to EXPAND the program?? GOP indeed.

And you're right. Mankiw himself never said otherwise (that I know of). My original post b4 the edit had a quote from a recent article by former CEA CHairman Hubbard where he says the comming entitlement shit storm will require incredibly high tax rates if we don't shape up. But the quote was from Mankiws blog and I thought it sounded incomplete and I don't have WSJ so I just dropped it all together.


Anyways...


I have actually never said Social Security shouldn't be privatized (have I?). I just never liked the stupid way Bush wanted to do it. If we want Social Security to be a forced savings program. We should make it a forced savings program. Not some confusing transfer program that actually discourages savings.

4/25/2006 9:57:07 AM

Actually I have some issues with Mankiw on this point. Not that I disagree the situation is unsastainable but if you go by the cutesy chart that he put up in his next to last post it looks as if all of the problem are a result of the tax cut which he favored.

http://www.whitehouse.gov/omb/budgetcharts/2007_budget/current_trends.pdf

Had there been no tax cut net interest would have fallen to near zero and mandatory plus discretionary would not have exceeded revenues until sometime in 2030. Mandatory would not have exceeded revenues untill sometime around 2070.

4/25/2006 9:39:34 PM

look, sometimes you have to whore yourself out for a bullet on a resume

4/25/2006 11:13:49 PM

[Edited on April 25, 2006 at 11:53 PM. Reason : n/m]

4/25/2006 11:53:00 PM

^^^
I thought you didn't believe in static economic analysis?

Can't get much more static than going "but if we held tax rates constant we'd have all this money omg omg!!1"

---

Quote :

"Socks``: I have actually never said Social Security shouldn't be privatized (have I?)."

I'm not gonna lie -- I'm too lazy to go find out. I vaguely recall you, me, Gamecat and someone else in a 4-way debate over it though... 

4/26/2006 8:40:36 AM

Although I believe he is right, Mankiw is the polar opposite in ideology than the political right wing. He was put on the commission to get other points of view. It doesn't surprise me that he's against the president's policy.

4/26/2006 9:21:55 AM

^^

Things calm down substatially when you start dealing with percent of GDP rather than raw numbers. We can basically set govrenment revenue as a percent of GDP with the tax rates. Yes, the distribution of GDP will change government revenues but not by that much.

The interest rate is of course also a product of government activity but the interest on nothing is nothing. So, if we had continued to pay down the debt we can safely say that net interest would decline.

The only arguement is that mandatory spending is <i>not</i> a function of GDP and hence changes in GDP would have changed mandatory spending as a percentage. However,

(1) There is a link between GDP and mandatory spending because social security is tied to wages and medicare to the cost of health care.

(2) You have to posit a big change in growth rates for the basic story that -- holding tax rates constant would have produced a continual surplus, not to hold.

4/26/2006 10:27:02 AM

^
we're talking 64 years down the road -- you don't need big changes in growth rates as a percentage to have big changes in revenue

and you keep making the same silly argument everyone else on teh L3ft makes, so tell me: what makes the pre-W tax-cut rate so special? why was that rate perfect? why not hike rates above that point -- surely that would be just as great, no? or why not cut rates even lower than they are now?

this orthodoxy of "omg change nothing!!!" is silly...

4/26/2006 11:06:26 AM

^

In revenue yes but not percentage of GDP collected. This one of the advantages of doing analysis in percent of GDP.

Quote :

"and you keep making the same silly argument everyone else on teh L3ft makes, so tell me: what makes the pre-W tax-cut rate so special? why was that rate perfect? why not hike rates above that point -- surely that would be just as great, no? or why not cut rates even lower than they are now?"

It is ironic that you ask. The answer is that it would have been the conservative thing to do. As in the conservative maxim "If it ain't broke, don't fix it"

The more analytical reason is that we know that those rates were not cutting into capital formation and hiring enough to slow growth. We know that because they were present durring a rapid expansion.

We know that high taxes will curtail growth but the relationship is not linear. An adjustment to a top rate of 45% might have disastorous long-term consquences with only a small increase in short term revenue.

The reason being conservative is good in economic policy is that the only way to check for sure if the model works is to make a policy choice. However, once you have made that choice you will suffer the consquences.

No, I want to be clear - I am not saying that I know that everything would have been fine if the rates had stayed the same. I am just saying that Mankiw is going around touting his little revenues chart, but according to that chart the Bush tax cut looks like a bad idea.

4/26/2006 2:15:32 PM