President Bush, man of the Left

Andrew Sullivan links to a spirited defence of President Bush's Keynesian economic policies. But he remains sceptical:

I agree that circumstances merited some increase in debt; that the tax cuts so far are no big deal; and that some spending increases might be justified on Keynesian grounds. I think Bush has engineered about as rosy an employment situation as possible for his re-election. The real issue is the long-term outlook. On that, the prognosis is horrifying; and the president doesn't seem to mind.

Horrifying? A summary table of long-term fiscal projections taken from the latest report (26 August) of the non-partisan Congressional Budget Office may be found here. The projected deficits for this financial year and next, measured as a proportion of GDP, are narrower than those of the mid-1980s. The projected deficit for 2004, at $480 billion, is the peak. Beyond that:

CBO estimates that current tax and spending policies would produce steadily declining deficits after 2004, which would change to surpluses for 2012 and 2013 - largely because of increases in revenues from the scheduled expiration of the major tax-cut provisions enacted in 2001.

The debt to GDP ratio would fall from last year's figure of 34.2% to 30.7% in ten years' time.

These are not forecasts; they are an assessment of baseline trends on the assumption of no changes to current legislation. And of course risks and unanticipated shocks to the world economy will arise over the next ten years. But the prognosis is not at all the apocalyptic one that Andrew imagines.

I suspect Andrew's apprehension is more political than economic. He believes Bush is a President like JFK: not conservative at all but activist in domestic policy as well as in defence of western democracy against a totalitarian enemy. I agree, and regard it as high praise.

Comments

[john b]

Pretty broad sense of "Keynesian" above... boosting government spending, which goes to poorer people, who have a higher marginal propensity to consume, which increases the multiplier effect plus overall happiness [1], would be more traditional. And less deranged.

Relevant why? I guess to the final paragraph: while I agree on the need to fund the fight against terrorism, what's the point (from the PoV of a person of the left) of having a domestically activist president if he doesn't believe in reducing inequality?

[1] http://www.smh.com.au/articles/2002/09/13/1031608327871.html (footnotes inelegant, but links banned. Unsure why the latter...)

[matt s]

You neglect to consider that, in the U.S., tax changes /never/ expire. Expiration dates are an implementor's dream -- they allow for bountiful future predictions with no evidence to support their actual expiry.

The income tax itself was given a legislated expiration date at inception. Needless to say, it never quite got stale enough for some.

[Katherine]

Andrew, as clever and perceptive he is on many issues, is entirely clueless when it comes to economics. It would not kill him to get some basic textbooks and learn (reading economic opinion pieces of fellow journalist does not qualify).
It may be dismal, but it is not entirely incomprehensible science.

[back40]

http://econlog.econlib.org/archives/000241.html

Arnold Kling makes similar points about Bush macroeconomics.

[Kimmitt]

Those CBO projections are based on pure fantasy -- if you look at their projected growth rates and assumptions regarding Federal spending, they have no bearing on reality. Let's keep in mind that the CBO's projected deficit for this year in January was $150-200 billion. Now we come to understand that it's more like $500 billion. That's how the CBO estimates, and that's the kind of estimation it's showing on its pages.

[Oliver Kamm]

The projected deficit for this year is $400 billion, not $500 billion. The CBO's projections have indeed changed a lot - right up to 2013 - since their reports earlier in the year. The principal reason is the incorporation of the effects of tax cuts. The CBO is required to make its baseline projections on the basis of current legislation. It's not fair to present them as being hopeless at forecasting when, as I said, their baseline assumptions are not intended to be forecasts but illustrations of the long-term impact of current policy. That's the subject that Andrew Sullivan is worried about, in my view unnecessarily.

[Gene]

Oliver, if you're so anxious to anoint a conservative Republican as a "man of the Left," I'd suggest that Governor Bob Riley of Alabama would be a better choice than President Bush.

http://hurryupharry.bloghouse.net/archives/2003/09/10/governor_riley_man_of_the_left.php

[tallan]

As a Republican, I like the sound of compassionate conservatism, but not with these deficits.

I have no faith in long term deficit projections, either by the CBO or any expert. There are just too many unknowns.