Brad DeLong Defends The Obama Budget

Brad DeLong takes on Keith Hennessey’s analysis of the Obama budget and doesn’t like what he sees:

Left out of Hennessey’s “analysis” is the reason that President Obama projects bigger deficits this year than he did last year–that the economy is extremely weak, and is much weaker than we expected it to be, and when the economy is weak the deficit goes up as revenues fall and social-insurance spending rises: a year ago the administration expected the unemployment rate now to be 7.7%, but it’s 10.0%; a year ago the administration expected the unemployment rate at the start of fiscal 2011 to be 7.0%, but now it expects it to be 9.8%; a year ago the administration expected the unemployment rate at the start of fiscal 2012 to be 6.4%, but now it expects it to be 8.9%.

You won’t learn any of this from Hennessey.

And, of course, left out of Hennessey’s “analysius” is the explanation that the weakness of the economy is also the reason that the debt-to-GDP ratio is projected to climb over the next five years: the debt-to-GDP ratio¬†oughtto climb during periods of national emergency–resisting an invasion, fighting a major war, suffering a depression, et cetera. Hennessey and his peers in the George W. Bush administration share with the Reagan and George H.W. Bush administrations the singular distinction of having run the only administration to raise the debt-to-GDP ratio without resisting an invasion, without fighting a major war, without suffering a depression.

Left out of DeLong’s analysis is the $1.9 trillion of projected tax increases that Obama is also proposing. DeLong makes a fair point that deficits and perhaps the overall size of the budget should increase in the midst of a severe economic downturn. I would assume that he would also argue that increasing taxes at the same time only serves to work at cross purposes with the fiscal stimulus which he seems to favor.

I’d be more inclined to buy into his analysis if he could reconcile the apparent contradiction. Otherwise, he has yet to persuade me that this budget is nothing less than a permanent expansion of the government’s share of the pie.


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