March 19, 2024

News Analysis: Balanced Budget Fight Is Philosophical and Fiscal

That question is at the heart of the warring Republican and Democratic budget plans coming out this week — with Representative Paul D. Ryan of Wisconsin vowing to eliminate the federal deficit within 10 years, and Senator Patty Murray of Washington State setting a more modest goal of bringing spending closer in line with revenue over time.

While economists generally agree that narrowing the government’s deficit and limiting the size of the debt are necessary in the long run, most argue that balancing the budget would not restore the nation’s still-weak economy to health in the near term. Indeed, rushing to do so with unemployment still elevated and the economy growing at only a sluggish pace could even set back the effort to reduce the deficit.

“There’s nothing magic about exact balance,” said Alice M. Rivlin, a Democratic economist at the Brookings Institution who has worked with Republicans like former Senator Pete V. Domenici on bipartisan deficit-reduction proposals. “The really important thing is to keep the debt from growing faster than the economy.”

The question of whether to balance the budget and when is a new staging ground in the long-running fiscal fight between Republicans and the White House. Mr. Ryan, whose previous budget proposals did not bring spending below revenue for decades, vowed this time to do so by 2023, in part to satisfy the demands of the more conservative members of the Republican Caucus.

Democratic proposals — both the Senate Democratic plan to be released on Wednesday and the White House budget coming next month — are both expected to narrow the deficit substantially without balancing the budget or running a surplus.

This week, each side accused the other of fiscal imprudence. Republicans accused the White House of “never” balancing the budget, and Mr. Ryan argued that ending deficits would foster a healthier and faster-growing economy.

“This is an invitation. Show us how to balance the budget,” Mr. Ryan said. “If you don’t like the way we’re proposing to balance our budget, how do you propose to balance the budget?”

Democrats argued that Mr. Ryan’s budget would balance only on the backs of the poor, cutting taxes for the wealthy while eviscerating the social safety net. Mr. Ryan’s plan does not “plausibly deal with deficit reduction,” Jay Carney, the White House press secretary, said Tuesday. “It is important to bring our deficits down and to reduce our deficit-to-G.D.P. But they are part of — those goals are part of the broader purpose here, which is to grow the economy and strengthen the middle class.”

Economists offered more nuanced views. Closing the budget gap over the longer term could be vital to sustaining economic health, some stressed, by ensuring that the government did not crowd out private investment and by helping to keep interest rates low. But that does not make it an immediate necessity.

“Over a long period of time, you’d have a higher standard of living if you moved to a balanced budget and stayed there,” said Joel Prakken, a senior managing director at Macroeconomic Advisers, a forecasting firm in St. Louis. “But you suffer some short-run pain, and you don’t want to inflict that when the unemployment rate is already high, the economy is still recovering from the legacy of the Great Recession, and the Federal Reserve has used up most of what’s in its quiver.”

Other goals — including stabilizing debt as a proportion of economic output, rationalizing the tax code and tackling the long-term fiscal challenge posed by entitlement programs — might prove more important in the coming years, several experts said.

“We need to do fundamental reforms to the system, and if we did fundamental reforms to the system, that would help so much that we wouldn’t need to worry about the deficit as much,” said Kenneth Rogoff of Harvard.

As sensible as a balanced budget might sound — much like a balanced checkbook for a family — countries are generally able to run modest deficits for years on end while still keeping debt stable as a share of economic output. One year’s deficit is effectively paid off by later economic growth, especially if a government is investing in public goods like roads and schools.

But several right-leaning fiscal experts described a balanced budget as a tool to force a fractious Congress to tackle the nation’s long-term budget problems.

Article source: http://www.nytimes.com/2013/03/13/us/politics/balanced-budget-fight-is-philosophical-and-fiscal.html?partner=rss&emc=rss

Economix: How the Budget War Was Framed

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Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

Political strategists often refer to “framing” as the way in which the edges of an argument define perceptions of its core. The term also has an older, sharper meaning that implies miscarriage of justice – as in “he was framed.”

Today’s Economist

Perspectives from expert contributors.

In the debate over the budget deficit and debt ceiling, the American people have been framed in both senses of the term. They have been given a misleading picture of the possibilities, and they have taken the blame for unrealistic attitudes.

Nominally, the budget debate focuses on spending cuts versus tax increases, with Republicans in one corner and Democrats in the other. What I see is a three-way tussle among the rich, the not very rich and the not rich at all over who should pay the costs of balancing the budget.

On this issue, differences among Democrats run deeper than those between the major players getting most of the press: President Obama and Speaker of the House John Boehner.

Consider a largely invisible proposal for balancing the budget, the People’s Budget, released in April by the Congressional Progressive Caucus, which includes 83 members of Congress.

Its proposed budget savings include major cuts to military spending based on immediate withdrawal from Iraq and Afghanistan. Its proposed revenue sources include new tax brackets for the rich (from 45 percent on income over a million dollars a year to 49 percent on income over a billion a year), restoring the estate tax and eliminating the Bush tax cuts.

The Economic Policy Institute provides a more detailed supportive analysis. Proponents have also developed a three-way comparison with budget proposals advocated by President Obama and Congressional Republicans that allows you to register your own preference.

Deficit hawks (at least those who are not tax chickens) should welcome the People’s Budget, because it offers a plausible path to debt reduction.

Matt Miller of The Washington Post noted that the People’s Budget would, unlike the Roadmap for America’s Future advanced by Representative Paul Ryan, Republican of Wisconsin and chairman of the House Budget Committee, generate a budget surplus at a predictable point in the future, winning the “fiscal responsibility derby.”

Paul Krugman, who praised the People’s Budget in The New York Times, observed that it stood little chance of being passed, but that the same was true of Mr. Ryan’s proposed budget.

Serious consideration of the People’s Budget in April could have reframed the budget debate by counterbalancing the rightward thrust of the Republican proposals. Serious consideration of it today would make President Obama’s focus on closing tax loopholes for wealthy individuals and corporations seem faint-hearted, at best.

The progressive tax policies endorsed by the People’s Budget have drawn remarkably strong support in public opinion polls, suggesting that the views of our most powerful elected officials don’t accurately reflect the views of the electorate.

An NBC News/Wall Street Journal poll in late February found that 81 percent of people would support a surtax on millionaires to help reduce the budget deficit. A Pew Research Center poll in late May found that 66 percent favored raising income tax rates on those making more than $250,000 and 67 percent raising the wage cap for Social Security taxes.

So why hasn’t a budget proposal that features more progressive taxes had a stronger, more visible impact on the national debate?

Poor press coverage is one explanation. Dave Moberg of In These Times asserted, “The corporate media give progressive alternatives short shrift, even though opinion polls show the public often supports such measures.” Peter Hart of the media watchdog group Fairness and Accuracy in Reporting made the more specific assertion that media coverage of the People’s Budget has been confined to opinion pieces, with no “hard news stories about it in the big papers.”

What about The New York Times, often characterized by some of its critics as having a liberal bias?

On July 14, I searched for the phrase “People’s Budget” on The Times’s Web site for occurrences over the last 12 months. I found the mention by Mr. Krugman, two readers’ comments on a previous post of his and a link on the Green blog to a brief derogatory comment in The Atlantic blog.

In short, “no hard news stories” about it (unless they omitted the proposal’s title). On the other hand, Representative Ryan’s Roadmap for America’s Future was mentioned more than a dozen times, though, of course, it has been in play longer. The most prominent articles focused on Mr. Ryan and his general philosophy rather than on the budget itself.

Maybe that’s the problem: the budget debate seems to elicit less hard news analysis than political framing and reframing.

And there’s no way that people can frame the People’s Budget if they haven’t even heard of it.

Article source: http://feeds.nytimes.com/click.phdo?i=d21fc5e9bab29a8a7f43a86f75808359

Economix: What We’re Reading: Takes on the New Budget Proposals

Economics doesn’t have to be complicated. It is the study of our lives — our jobs, our homes, our families and the little decisions we face every day. Here at Economix, Catherine Rampell, David Leonhardt and other contributors will analyze the news and use economics as a framework for thinking about the world. We welcome feedback, at economix@nytimes.com.

Article source: http://feeds.nytimes.com/click.phdo?i=56d4ca3d6eea7cd799cd7b80610e8992