Representative Paul Ryan has produced another picture of what it would take to get the government budget under control and bring down the soaring fiscal deficits now being experienced.
In October 2011, the gross public debt of the United States government was in excess of $15 trillion. Over the past two years or so, I have been arguing that there is a very good chance that in the next ten years the debt outstanding will double.
President Obama has produced his outline for a new budget trajectory with debt increasing by only about $6.5 trillion over the next ten fiscal years. However, I have absolutely no confidence in the ability of Mr. Obama to lead in this area and so I would argue that this proposal is DOA.
The growing body of literature on the economic leadership of the Obama administration is unanimous about the failures embodied within this organization. Here I reference the book by Ronald Suskind, “Confidence Men,” the recent book by Noam Scheiber, “The Escape Artists,” and the Washing Post report about the negotiations between Obama and the House Republicans over the “big picture” deal-making last year that collapsed when House Speaker John Boehner told the President “We don’t have time to reopen these negotiations.”
The liberal writer John Chait in New York Magazine expanded upon this latter story: “How Obama Tried to Sell Out Liberalism in 2011.”
Perhaps the most damning comment on the process of conducting economic policy in the Obama administration is the one attributed to Larry Summers, who repeatedly told Peter Orszag, director of OMB that, “with Obama as President, ‘we are home alone.’” (See Suskind’s book.)
The Obama proposal cannot really be considered to be credible.
One could argue that the Republican budget put forward by Representative Ryan may never be put into effect but it adds one thing to the discussion that is very helpful. It is a credible effort to state what needs to be done to bring the federal budget under control.
You may not agree with all of the choices included within the document, but Ryan does present us with a picture of the extent things need to be brought into order.
Does it promise a balanced budget?
Yes, but not until 2040.
But, we were close to a balanced budget in the late 1990s…what happened?
Well, I think if you seriously examine the budget situation you see how seriously we have gotten out-of-control over the past ten years or so. The discipline and effort that must be forthcoming to even think about balancing the budget in 2040 shows how far events have gotten away from us.
Robert Mundell, Nobel Prize winning economist from Columbia University, was interviewed on Bloomberg Radio the other day. Mundell, in his provocative way, stated that “The public is looking for free lunches and the political competition for votes makes the politicians off them free lunches.” He added, “That’s what gets us in to the difficulties of insolvency.”
Well, lots of free lunches have been purchased by the federal government in recent years. The problem is, how do you take “free lunches” away from the electorate once they have been given to the voters?
Mundell continued, “You could have fiscal stimulus back in the days of (John Maynard) Keynes, when the government was a small proportion of gross domestic product and there was no insolvency problem.” Today, you just don’t have the space to create more debt, issue more bonds to pay for the deficits, and expect everything to work out well.
Representative Ryan gives us a credible place to start. And, given that presidential candidate Mitt Romney has bought on to the plan, we will be hearing a lot more about Ryan’s plan in the future.
If you don’t like Ryan’s plan…that is OK. Tell me how you would arrange things…let me see how you would work things out.
I don’t believe the United States economy can be all that it can be in the next ten years if the federal government adds another $15 trillion to the gross public debt. I don’t believe that the economy can be that vibrant if we even add $6.4 trillion to the debt as President Obama has proposed.
What’s your plan. Let’s talk seriously about it. I believe that Representative Ryan has done us a service by presenting his plan for all of us to see. Let’s respond!