An articulate, fairly unbiased piece on the U.S. budget surplus debate (from Robert Reich no less)

[glenn1]

An extremely well-written and refreshingly even-handed piece considering the source, Robert B. Reich (Secretary of Labor under President Clinton). Well worth a read for those interested in the subject.

WSJ article

excepts follow:

"Welcome to the magic world of fiscal constraint as an end in itself. Both parties have bought into the budget numbers racket--a zero-sum game that confers enormous power on green-eyeshade actuaries in the Congressional Budget Office, the Office of Management and Budget, the Social Security Administration and even the International Monetary Fund. Their assumptions about productivity growth, population growth, levels and rates of immigration (both legal and illegal), and mortality, whirl and click and then spit out budgets that are either balanced (win!) or unbalanced (lose!) over arbitrary periods of time.

Meanwhile, the American public--though confused and bored--nonetheless has come to accept the premises that the Social Security surplus must not be "raided," that a balance in the remainder of the budget is always better than an imbalance, that revenues should always exceed expenses, and that debt is bad. Politicians, either ignorant or fearful of the truth, play along. Much of the financial press accepts the gospel as given. And thus the gap between public understanding and economic reality widens.

Back to basics for a moment. The purpose of fiscal policy is to accomplish two objectives. The first is to complement monetary policy in making full use of the nation's productive capacities. This may mean running deficits when the economy is shrinking and when neither business nor consumer spending is adequate to the task of maintaining adequate aggregate demand.

Granted, this is a tricky thing to pull off. Timing is difficult. By the time Congress enacts a tax cut or additional spending and it is put into effect, the economy may already be on the rebound. Mostly by luck, the 2001 tax rebate checks are arriving at about the perfect time to give families a bit of incentive to keep spending--not as much incentive as they probably need, but a worthwhile complement to monetary easing.

 

[Javelin]

Well, Robert Reich never been overly concerned with deficit spending so i'm not entirely surprised at what he said. He does have a point.. the whole Social security surplus issue is all politics. But, Washington is all about perception, spin and politics... I can just see the Democrats now... would you rather have social security or missle defence? In hindsight... the tax cut was poorly thought out.. its too big and too slow. Most of it won't come into effect until 2004 or later meaning it does relatively little to stimulate the economy right now when its most needed. And it does mean that Bush's pet projects like missle defence are looking mighty expensive. McCain was right, the right policy would have been to attack the federal debt all out.