Obama's Budget

[The Brain]

I'm a skin half white kind of guy.

[Razgovory]

Obama has been a rather huge disappointment.

I told you people once before: starting in the 80s every major city had to elect a token black dude to prove it wasn't racist... nearly all of these mayors were horrible (Dinkins, Goode, Barry, Kilpatrick....) Maybe Obama is America's token black mayor.

Dinkins wasn't horrible.  Anyway, I thought the UK demonstrated that deep cuts don't actually decrease deficit spending.

[Ed Anger]

I'm a skin half white kind of guy.

And pretty fly too.

[The Minsky Moment]

From Jan Hatzius, chief economist at Goldman Sachs:

http://www.calculatedriskblog.com/2013/04/the-rapidly-shrinking-federal-deficit.html

The federal budget deficit is shrinking rapidly . . .  In the first three months of calendar 2013--that is, since the increase in payroll and income tax rates took effect on January 1--we estimate that the deficit has averaged just 4.5% of GDP on a seasonally adjusted basis. This is less than half the peak annual deficit of 10.1% of GDP in fiscal 2009.

There are three main reasons for the sharp reduction in the deficit:

1. Lower spending. On a 12-month average basis, federal outlays have fallen by a total of 4% in the past two years, the first decline in nominal dollar terms over a comparable period since the demobilization from the Korean War in the mid-1950s.

2. Higher tax rates. The increase in payroll tax rates in January 2013 has boosted federal receipts by around $120 billion (annualized), or about 0.8% of GDP.

3. Economic improvement . . ..

We expect the deficit to continue to decline and are forecasting a deficit of 3% of GDP or less in fiscal 2015 . . . In our view, the most important implication from the reduction in the budget deficit for the near-term economic outlook is reduced pressure for further fiscal retrenchment. Partly for this reason, we expect the drag from fiscal policy on real GDP growth to decline sharply from around 2% of GDP in 2013 to around 0.5% in coming years. This is a key reason for our expectation that real GDP growth will accelerate from around 2% (annualized) in Q2/Q3 2013 to 3%-3.5% in 2014-2016.

The case for extreme fiscal retenchment in the US is not evident to me.

[MadImmortalMan]

Shouldn't 2009 be excluded from being used as any kind of benchmark? I mean that year was a big anomaly.

[Admiral Yi]

The case for extreme fiscal retenchment in the US is not evident to me.

Agreed, the situation is much better than I thought.  I missed a couple points of deficit reduction somewhere since Teh Fiskal Kliff talks.  Then it looked like we were reducing from 8% of GDP to 7%.  All of a sudden we're at 4.5% seasonally adjusted (The Economist said 5.5%--I assume unadjusted).

So now we're no longer hurtling towards Italy status.  Instead we're France.

That being said, I believe that still leaves unresolved the *future* deficits that will be caused by Baby Boomer retirements.

[derspiess]

Dinkins wasn't horrible. 

[The Minsky Moment]

So now we're no longer hurtling towards Italy status.  Instead we're France.

That being said, I believe that still leaves unresolved the *future* deficits that will be caused by Baby Boomer retirements.

We are france with the world's preeminent reserve currency in our control, which is an advantage.

And while I realize the WH budgets present plans for 10 years out, it's hard to take those seriously, especially when there are only 3 years left in the term.  The part of the budget proposal that actually matters is the proposal for the coming fiscal year.  And without examining any specifics, the aggregate looks reasonable to me.

I suppose there might have been confusion about Obama's messianic pretensions back in 09, but anyone who might have thought that had plenty of time to be disabused.  We still re-elected him.  I don't think it is fair to attack him now for failure to live up to the messianic promise: either by resolving all problems through divine miracles or by happily climbing up on a political cross and handing his opponents the nails.

[DGuller]

Dinkins wasn't horrible.

He paved the way for Giuliani.  That by itself is unforgivable.

[Sheilbh]

I don't get the critique here. Surely by its nature mandatory spending rises (or falls) in a certain way based on the laws establishing those programs. There'll be the odd varying assumption about how many people will choose to work for longer or how much healthcare inflation can be reduced but that's just different assumptions (or dodgy accounting). But if you want to spend less on Social Security or Medicare you reform them, until then any budget has to account for them based on the current law?

[Phillip V]

Obama proposes more money for cybersecurity.


The US Army has created new military occupation called "Cyber Network Defender". I am going to sign up.

[Eddie Teach]

Dinkins wasn't horrible.

He paved the way for Giuliani.  That by itself is unforgivable.

So you and Spiess are in agreement then.