Bad stimulus could make deficit worse
President-elect Obama is faced with making a difficult decision about where to cap his stimulus so that our deficit doesn't get out of control. But based on what he's heard so far, commentator David Frum thinks he's already gone too far.
David Frum (David Frum)
More on Commentaries, America's Financial Crisis
TEXT OF STORY
Kai Ryssdal: Once you wrap your brain around the numbers -- trillion-dollar deficits and a stimulus nearly that big -- it's easier to appreciate the rock and the hard place that Barack Obama finds himself between: Ever-increasing deficits or a stuck economy. Commentator David Frum sympathizes. But he worries the president-elect has already gone too far in one direction.
David Frum: "Americans will eat anything if it is toasted and held together with a couple of toothpicks and has lettuce sticking out of the sides, preferably a little wilted." So said Raymond Chandler's fictional private eye, Philip Marlowe. He could have added: and anything they still won't swallow, we can put in Obama's stimulus package.
The Wall Street Journal reported Tuesday that President-elect Obama plans to offer states up to $7 billion if they will pay unemployment benefits to laid-off part-time workers who would not normally qualify. Obama will also press states to include workers who wouldn't otherwise qualify into their Medicaid programs. Obama is reportedly proposing that these two new social programs expire after two years. But here's another saying, and it isn't fiction: In government, there is nothing more permanent than a temporary program. So, how is all this to be paid for?
We are heading for a trillion-dollar deficit. As Obama himself acknowledges, probably years of deficits in the trillion-dollar neighborhood. Relative to GDP, these would be the biggest deficits since World War II, twice as big as the biggest of the deficits of the 1980s. It gets worse. All of this is happening before the baby boomers have begun to retire. What happens when the 78 million boomers begin to claim pensions and Medicare?
Economists disagree whether a fiscal stimulus is really needed. Many argue that the best way to fight a recession is with monetary policy. But even if fiscal stimulus is the right way to go, we need to keep our heads. Don't allow fiscal stimulus to become a disguise for permanent expansions in the size and cost of government -- especially at a time when the bill for past permanent expansions is soon so massively to come due.
The irony is: If Obama disregards caution and indulges his ideology now, ballooning the deficit beyond all reason, he may find himself spending his second term desperately and belatedly cutting the very same government he came to office eager to expand.
RYSSDAL: David Frum is a resident fellow at the American Enterprise Institute. His most recent book is called "Comeback: Conservatism That Can Win Again."
Comments
Comment | Refresh
From placerville, CA, 06/07/2009
To ease the national and states deficits, take away the take home cars nationally. Save gas, repais and maintenance. Start payroll cuts at the top. not the bottom. Then we can keep many more people employed. If we lose law enforcement and firefighters it could cause Major disasters. if budgets do not come in on time, cut their pay by an additional 10% for each day delayed. PLEASE CONSIDER THE SAVINGS !!! I would like a response.
From Brooklyn, NY, 01/12/2009
Every time I listen to this guy's Op-Eds here, or anywhere for that matter, I'm always left wondering: "Who is this, and why would anyone think he has any idea what he's talking about?"
Is there anybody else from a conservative economic background that Marketplace can find that has any real experience and insightful thoughts and ideas?
This guy just sort of writes a lot about what he kinda thinks. Who ever said it had any merit? Everything I have ever read, seen or heard him say, anywhere, reeks of hollow "smartypants" stick poking. I've never walked away with:"Hmm. Interesting."
Mostly it's: "And you point is....?"
From Sacramento, CA, 01/08/2009
David Frum reminds me of Rip Van Winkle awakening from a long nap, wiping the sleep from his eyes, and talking about the old issues as if they were current. Too bad he was asleep during the last eight years of borrow & spend Bush/Republican policies. His voice would have been a welcome counter-balance at that time, but as it is now he just sounds like someone trying to undermine the new president. The actual issues apparently do not actually concern him, so if you are ever short on time, but still want to give him 2 seconds of air time, you could limit his message to “Republicans good, Democrats bad.”
From Seattle, WA, 01/08/2009
Mr. Frum: Your disingenuous diatribe ignores the colossal failure of the last eight years of the Bush administration. As soon as you started spouting off about "If Obama disregards caution and indulges his ideology now, ballooning the deficit beyond all reason...", you lost me.
Are you really this ignorant, or just oh-so-willing to hide behind your eggshell ideology? George Bush & his Republican congress have presided over the worst deficits in U.S. history, and it is no accident that the current global economic meltdown occurred on the Bush watch. The blithe & cavalier & arrogant lack of regulation of the financial industry is a direct result of Bush-Republican policies -- which even St. Greenspan now admits was a big mistake.
And shame on you Kai Ryssdall for foisting this phony nonsense on the American people. The November election showed that only the dimmest of the dim -- and you managed to showcase one tonight -- still think like this.
From Seattle, WA, 01/07/2009
Ok, Mr. Frum, what's the alternative? I hear a lot of complaining by people with secure jobs about a ballooning deficit. Go tell the six employees I had to let go last month expanded unemployment is a bad idea.
As a small business owner I know there are times one has to make the unpleasant choice of taking on debt to make it through a slow period. Now that option is gone for most of us and the only alternative is for the government to do it for a short time.
If not, the deficit will grow anyway because of plummeting tax revenue. Better to make the investment now so there is at least the possibility of increased economic activity in coming months.
From Bethany, CT, 01/07/2009
Mr Frum: "if Obama indulges his ideology..."?? Excuse me, what have the last 8 years been but an indulgence of the ideology of the American Enterprise Institute? And we can see very well where that has landed our nation. Like everyone else, you are entitled to your opinion; but a huge dollop of humility would be in order before you start preaching to the PE who is charged with cleaning up the mess.
From Raleigh, NC, 01/07/2009
Let's see now -- Obama is inheriting a 3 trillion dollar deficit and Frum is worried about ballooning it even more with social spending packages that may be the very thing that will turn our already-in-the-crapper-and-being-flushed-down-to-the-ocean economy around? I heard today that no one -- not even the Democrats -- expects to balance the budget within the next year, or even the next 2 years. But if government manages all the economic elements -- and there are many -- if government can juggle all the balls without dropping too many on the floor -- then the gamble is worth it and will pay off. If low- and middle-income Americans don't find hope and pretty damned soon, consumer spending and saving will be lightyears from recovery. Obama's daughters will be trying to make ends meet!
From Winston-Salem, NC, 01/07/2009
Sometimes David Frum is correct, at least partially. But when he calls for more monetary policy, he misses the point: fiscal policy (that is, govt. budgeting) has become impotent due to decades of deficit spending. Sound economic policy includes a balance of monetary policy and fiscal policy. When we can get to regular and sustained balanced govt. budgets (just like individuals must do), then we can have useful tools to manage the economy.
From brook;yn, WI, 01/07/2009
I listen to learn. Why do you have this guy on?
I didnt work i the 20s and it didnt work in the 00s. Look at productivity and wages splits. Look at the 'job growth the last 6 years. It didnt keep up w/ population!
Get this guy another venue. He can discus offshoring being good for the USA w/ Chris Farrel.
From Pickens, SC, 01/07/2009
Check out what Galbraith said about trickle-down econ: horses and sparrows et al. ... But the issue it seems is that the "American Enterprise Institute" is unable to admit that Reagonomics was a tragic mistake. Get over it. Government is Not the problem and Markets cannot solve our problems. Afterall, Government is real, physical. Markets are artificial constructs, a definition only. People are real, not "markets."
One more thing: Marketplace itself risks a loss in credibility if it (they, actually, to be personal about it) continues to count on the very "experts" who led us into this debacle. There was a refreshing commentary on the morning report, however, so maybe there is hope.
Good luck to all ...
From MD, 01/07/2009
David Frum can always be relied upon to continue kpromoting the same failed policies which have caused the current crisis. From Reagan to W, this stupid, supply-side, trickle-down mythology has ruled economics. The last honest statement G.H.W. Bush made was when he called Reagonomics "Voodoo Economics."
The American Entriprise Institute is nothing but a propoganda outfit dedicated to supporting the rich and screwing the rest of us.
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.