[lbo-talk] liberal austerity

Politicus E. epoliticus at gmail.com
Thu Mar 26 08:14:16 PDT 2009


Hi. I am reading the CBO report on the Obama adminstration's budget proposal, and find myself somewhat puzzled. On the one hand, I believe that an orthodox austerity program might be on the agenda in future fiscal years. On the other hand, the CBO report does not confirm my view. According to their forcasts, which must be taken with more than a bit of skepticism in light of the failure of many macroeconomic models to predict this economic crisis, the on-budget deficit will be 14.1% of GDP in 2009, 10.4% in 2010, 7.3% in 2011, and about 5% by the time of the next presidential election.

That does not, on the face of it, seem to be an austerity program. According to the today's WSJ, most "centrists" & "moderates" are attempting to hold the line at 3%. Reading Doug's post on Timmy & the Establishment, perhaps we can interpret the 3% line to be the maximum that the hawks are willing to concede to Obama's budget under the circumstances. In other words, if they are doing it because they have to, not because they want to, then they must operate strictly within the 3% parameter. But that does not speak to any cuts that might be coming in future fiscal years.

I still need to read the whole CBO report, but if they do implement an austerity plan, I wonder which programs will be targeted. It seems that privitization of pensions is off-the-table for now, although I'm not willing to put too much weight on this belief. I wonder if anyone has thoughts on this. There's also this Volcker-led tax "reform" commission to consider.

ep



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