I’m traveling today, but I want to point out a great piece written by MIT Professor Simon Johnson. It’s titled “America’s Exceptional Fiscal Conservatism.” (Professor Johnson has recently co-authored a book about our national debt and why it matters.) Here’s a link to the article.
Johnson’s piece makes a tremendous point: “In most countries, to be “fiscally conservative” means to worry a great deal about the budget deficit and debt levels – and to push these issues to the top of the policy agenda.” In most countries, the fiscal conservatives insist “on the need to boost government revenue while bringing spending under control.”
The United States is very different in this regard. Fiscal conservatives in the U.S. care more about cutting taxes – regardless of the effect on the federal deficit and total outstanding debt.
Johnson says that it’s been a mixed blessing that foreigners have been willing to finance us. It’s allowed us to be fiscally irresponsible. We overspend and foreigners buy our Treasuries (and accept very low returns). In fact, whenever there are problems (our financial crisis, our debt limit political problems, etc.), investors flock to our Treasuries.
Johnson says, “Ryan and members of the Tea Party wing of the Republican Party undoubtedly want to cut the size of the federal government, and they have articulated plans to do this over several decades. But, in the near term, what they promise is primarily tax cuts: their entire practical program is front-loaded in that direction. The calculation is that this will prove politically popular (probably true) while making it easier to implement spending cuts down the road (less obvious). The vulnerability caused by higher public debt over the next few decades is simply ignored.” He also points out the Rep. Ryan supported President Bush’s spending spree.
Many of you will want to dismiss Professor Johnson’s piece as a liberal attack on conservatives. In my opinion, it’s not that at all. This is not written in support of President Obama. Rather, it’s a frustrated fiscal conservative who thinks that our approach is totally off base. He thinks that we’re all being sold a bill of goods by politicians who claim to be fiscal conservatives but have supported excess spending in the past. That doesn’t give you faith that the “starve the beast” approach is going to work. Simply cutting revenue and saying that we’ll cut expenditures twenty years down the road is a huge gamble.
Have a great weekend.
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