Thursday, January 21, 2010

Krugman, Hennessey skeptical of deficit commission

As the Washington Post reports, the Obama administration is set to sign an executive order establishing a bipartisan commission to look at ways to reduce the budget deficit. Both Keith Hennessey on the right and Paul Krugman on the left are skeptical.

Hennessey does a terrific side-by-side of the Obama administration's plan for a commission versus the Conrad-Gregg commission proposal. One of Keith's strongest points is with regard to the goals of the relative commissions: most commission proposals have focused on the long run, in particular the growth of entitlements. While the Obama commission would be able to make recommendations in these areas, their specific goal is to reduce the deficit to 3 percent of GDP by 2015. Not only does that tend to ignore the longer-run problems, it seems to me that the short run deficit really is the business of Congress. I'm fine on a fast track procedure by which a commission can recommend longer-term reforms, but if we also need a commission to balance the budget year-in and year-out then we might as well send Congress home.

Krugman argues that the Greenspan Commission that led to the 1983 Social Security reforms was just a ruse to raise taxes on working people to fund tax cuts for the rich. I'm not sure how well that really holds up, since it's pretty clear that the Greenspan Commission didn't know that its proposal would lead to short term surpluses, and if it didn't, it's hard to argue that it intended to use those short-term surpluses to offset deficits driven by tax cuts elsewhere. In any case, I somehow suspect that's not how an Obama commission would end up. If anything, there's a reasonable fear of the contrary: that it would push to increase taxes in ways that Democrats alone would like to do but politically couldn't accomplish.

1 comment:

JG said...

We're heading for a round of "budget commission wars", due to the Conrad-Gregg commission proposal.

Personally I doubt that it could lead to any significant legislative result, because unlike during Greenspan Commission days, the crisis is not upon us. There is no unavoidable need today for the party leaders to do something to infuriate their bases -- so no commission is going to help them do in the least-painful way what they have no intention of doing.

That said, the partisans are lining up attacks an Conrad-Gregg if only to stifle the ideas it might float: AARP and the left attacking it because they knows it has to recommend cutting entitlements, and right-side groups because they know it has to recommend tax increases (the Greenspan combo!). Arithmetic leaves no option.

In this context, suddenly quite a number of shots are being taken at the Greenspan commission to debunk the "false" belief that it did anything constructive, saying instead that it was actually a failure.

E.g., the NY Times has a story quoting Robert Ball:
Mr. Ball calls the Greenspan Commission a failure. As he tells it, only a willingness to compromise by the two principal antagonists of the time — Ronald Reagan, the Republican president, and Representative Thomas P. O’Neill, the Democratic House speaker — made it possible for Mr. Ball and a few others to salvage from the deadlocked panel a deal that raised payroll taxes...
... and Stan Collende r has a bunch of posts shooting at Conrad-Gregg, saying the Greenspan Commission "failed miserably" (and shooting "vehemently" at Hennessey for totally imagined praise of the Greenspan Commission and supposedly supporting Conrad Gregg).

All the attacks on the Greenspan commission seem an indirect attack on "commission" budget control efforts today. (The Times story says: “Above all,” [Ball] added, “we should not allow ourselves to fall into the trap of expecting miracles from another Greenspan Commission — by deluding ourselves into believing, mistakenly, that the first one was a great success.”)

But by what standard was it not a success? As I see and read history, the purposes of the Commission were to (1) Come up with ideas to be used closing the SS funding gap; and more importantly (2) Give Ron and Tip political cover enabling them to agree to raise taxes and cut benefits respectively, without being killed by their own political bases.

Well, (1) Congress closed the gap using ideas from the commission, and (2) The compromise they enacted is to this day known as "the Greenspan Commission fix" instead of "the O'Neill benefit cut" & "Reagan tax increase". That looks pretty much like success to me.

The Times story seems to peg the Greenspan commission as a "failure" because a lot of hard work had to be put in at the end, with pressure from the political leaders, to get its final agreement -- instead of them all sitting around agreeing like a bunch of disinterested Platonic Guardians. Well, duh.

The liberal icon Ball may have underestimated his value to Tip in muting criticism of the deal from the left. ;-)

As to Krugman, he'll say anything convenient for him in the argument of the moment. I can point to him, back during the time of the Bush SS reform proposal, saying the trust fund bond mechanism set up by the Greenspan commission created real national savings that paid down the debt to the public -- and that anyone who said different accused the responsible bipartisan leadership that had saved social security of being deceitful scalawags, which was unthinkable. Today he says the Greenspan commission was part of a game of "three card monte" in service of the rich. Tomorrow...?