FT.com / Comment / Editorial - Budget distractions: The Obama administration’s 2011 budget... the mood is more siege mentality... deficit dread sweeps the country and hence Washington, the focus is on short-term medication of the deficit rather than two altogether more important tasks – strengthening the recovery and securing lasting fiscal health... reckless politicians have persuaded voters that runaway deficits threaten their livelihoods more than a renewed slowdown. This makes the administration sound a bit like a small European country eager to reassure Brussels: it wants to cut the deficit to 4 per cent of GDP within three years.
Such a large swing is fine if growth proves robust, but dangerous if it does not, which is far from unlikely. Unemployment is likely to stay above 9 per cent into 2011....
Deficit-reduction noises may be no more than that: what matters politically is to be seen to care about the deficit but not do anything painful to shrink it. Besides, the US can afford a few more large deficits: net public debt, now just over half of GDP, is manageable. In the fine tradition of US budgets, however, the real fiscal threats are left unaddressed: untamed growth in health spending; demographic pressures on social security; and waste and lack of control over military spending, a sacred cow comfortably nestled in every congressional district. A proposed three-year spending freeze signally fails to apply to any of these....
Obama must push harder: that structural fiscal problems are not of his making does not make them any less of his responsibility.
Tuesday, February 2, 2010
Bungle in the Budget
Brad DeLong quotes from an editorial in the Financial Times to comment on the Obama 2011 budget.
