Megan McArdle reacts to the same NYT article I commented on yesterday in much the same vein as I did:
The whole debate seems totally weird to me, and highly inflected by an arbitrary choice of endpoints which makes it seem as if George Bush squandered an $800 billion deficit bequeathed to him by Clinton, which was his sacred duty to preserve in amber.
But, just for starters, that $800 billion was not a real number. The budget surplus was $232 billion in 2000, about $292 billion in today’s dollars, or about 2.5% of GDP. That is, coincidentally, about what we lost in revenue when the stock market bubble burst and we lost all that lovely capital gains revenue. The imaginary number comes from assuming “current law” as of 2000. Due to some quirky rules, this does not just mean assuming that Bush didn’t spend more or tax less than Clinton. It actually means assuming away some things Clinton *did* do, like the $50 billion annual “temporary” AMT fix.
Moreover, even if this had been something like a real number, we would not have arrived in 2008 with an $800 billion surplus. Any president would have done about what Bush did–some combination of spending it, and cutting taxes. The American public was not going to happily pay an extra 6% of its income to Uncle Sam so that we could pile up some massive wad of cash. And if they had, by 2008, we’d simply have been pointlessly imposing deadweight loss on the American public through unnecessary taxes.
As I suggested in my post yesterday I think the thing to bear in mind is the trend. The trend is not sustainable, even less sustainable when you take into account the large drain that Social Security and Medicare are even now beginning to place on general revenues.
Note, by the way, that the Obama Administration does not even pretend that their plans for healthcare reform will result in cost savings in the foreseeable future. I, personally, do not believe that their plans will result in cost savings at all.
But cost savings there must be unless you’re content for taxes or borrowing to increase to make up the difference. Interests rates are almost certainly lower today than they will be in the future. Building increased borrowing into our fiscal model is not good governance. And increased taxes will necessarily mean slower growth than there otherwise would have been. With growth looking as though it will be very slow indeed for the foreseeable future, that doesn’t seem like a particularly good plan, either.
