Doug's LBO article: Preposterous economic projections or unstated logic?

Max Sawicky sawicky at epinet.org
Sat Mar 20 09:26:01 PST 1999



> . . .
> Suppose that an unstated goal of our leaders *is* a near
> stagnant economy? Is suspecting that so crazy on my part?

Depends on who among 'our leaders' is being referred to. I doubt many politicians favor slow growth. That good times favor incumbents is a truism.

The most important point about projections is not whether they are done 'correctly,' but that they put the wrong set of decisions in front of people.

In a simple model of growth where private capital is the only motive force, naturally the moral of the story is always going to be to increase saving, and the easiest way to do that is to reduce public debt.

Growth is first more entwined with public policies pertaining to investment, less well-understood than the Trustees' model presumes, and finally a matter of short-run policy regarding employment, among other things. Every time the economy performs above expectations, the entire long-run projection is adjusted; this has happened quite a few times by now.

The rage for debt pay-down will meet its true test when unemployment begins to rise. We can only hope that the rules surrounding such a policy do not prove insuperable. At that point public investment will become salient again as well. In the meantime, there are plenty of awful targets -- privatization of Social Security/Medicare, and pointless GOP tax cut proposals.

mbs



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