Paul L. Caron
Dean




Wednesday, September 8, 2010

Buchanan: Good Deficits -- Protecting the Public Interest from Deficit Hysteria

Tax Prof Neil H. Buchanan (George Washington) has posted Good Deficits: Protecting the Public Interest from Deficit Hysteria on SSRN. Here is the abstract:

President Obama has come under increasingly fierce criticism for the size of the federal budget deficit, as both Democratic and Republican politicians loudly proclaim that federal spending should be cut. This article explains why such anti-deficit fervor is misguided and simplistic, and why, perhaps counter-intuitively, cutting government spending can hurt the country, rather than help it, in both the short run and the long run.

In the short run, cutting deficit spending can be disastrous to the economy, especially if the economy is already in decline. In addition, because the federal budget fails to separate spending that provides long-term benefits to the economy – such as spending on education and infrastructure – from spending that provides no long-term benefits, it is just as politically expedient to cut valuable spending as it is to cut waste: both types of spending cuts reduce “the deficit.” Thus, indiscriminate cuts in government spending will reduce the deficit, but could also harm our long-term prospects.

This article proposes a novel solution to this problem: The creation of an independent agency to fix the current incoherent and damaging budgeting process. The “Growth Budgeting Board” could eliminate indiscriminate and poorly-timed spending cuts, protect valuable investments from the budget ax, and discipline the political process to avoid gamesmanship and abuse.

https://taxprof.typepad.com/taxprof_blog/2010/09/buchanan-.html

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Comments

Their is nothing novel about an independent agency. That's who the administration has already delegated deficit and debt reduction to. Its also who Congress charged with reducing medicare expenditures. Remember Bush's commission on rationalizing the Code? I can go on.

This is another useless suggestion; Congress does not give any such commission authority over the budget because the budget is where Congress pays off its respective constituents and gets reelected.

Posted by: guy in the veal calf office | Sep 8, 2010 4:38:18 PM

Typical of the socialist mindset: let's create another government office to make "good" cuts from the budget, a function the Constitution gives to Congress. The continuing failure of academia, Congress, and the Executive Branch to understand where the money comes from and "It's the spending, stupid!" is simply incredible.

Posted by: TexEcon | Sep 8, 2010 9:28:03 AM

When Obama carried something like 40 states, the left loved the political process. Now that his political base is disintegrating, it is all about the public's "misunderstanding" of economics and the need to insulate the system from it. I have a better idea: elect a President and a Congress who are actually committed to fixing the economy and not taking advantage of the crisis, a la Rahm Emanuel, to push through policies that nobody needs or wants

Posted by: mike livingston | Sep 8, 2010 2:53:19 AM