Starving the Beast

Source: OMB

The next time somebody like Kevin Drum starts talking about starving the beast can somebody hit him with a mackrel? President Obama is promising 95% of “working families” a tax cut, but also a massive increase in federal spending for the foreseeable future. Back during the dark Bush years, Bush’s deficits and increase in the debt was some sort of “starve the beast” approach to limiting government. But now we don’t see that kind of rhetoric much anymore.

Now of course the above graph assumes that things pretty much go President Obama’s way. For example, if the Republicans can somehow rally and take back either the Senate, the House or both…well the above graph would obviously change. The economy might come back stronger than anyone has forseen which would also change the graph (for the better). Of course, sticks-in-the-mud such as myself might point to this graph in the same report and note that the idea of higher than average growth is unlikely given what appears to be a downward trend in economic growth.

And I still think that for those of us who favor limited government this is cause for concern. Yes its a projection, yes it might not come to pass, but at the same time this indicates that, given his preferences, policies, and goals, President Obama is content with a much, much larger federal government as measured as a percentage of GDP.

FILED UNDER: Economics and Business, Government, , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. G.A.Phillips says:

    promising 95% of “working families”

    While he and his like minded governors, congressmen, and senators give us new taxes this size of, hmmmmmm, can’t think of anything that big.

  2. odograph says:

    Steve I read your post very carefully. What I was looking for was a recognition that, despite the straight comparison between Bush deficits, and Obama deficits, that we have significantly different conditions.

    I saw the mention of “what appears to be a downward trend in economic growth” but I did not see mention of the hundreds of billions pumped through AIG etc.

    Explain to me, reasonably, if an honest discussion of budget and deficit can really be made without recognizing special conditions?

    I mean, I do remember that you are in favor of “automatic” counter-cyclical expansion of spending in recessions, through the mechanisms of unemployment benefits and welfare. Those themselves would produce a “somebody’s” deficit, regardless of who was President in “what appears to be a downward trend in economic growth”.

  3. steve says:

    Woot! A conservative writer using data! Keep it up. The intellectually honest thing to do now, is post the graph showing how much of the projected increase in debt is from Obama’s proposals and how much from entitlement spending.

    I agree that the Obama team’s projections for growth are too optimistic. This is a global recession. I foresee tax increases.

    Steve

  4. odograph says:

    Steve, why not a line for Paulson’s proposals 😉

  5. The problem is that the beast can’t actually starve until all available food has been consumed, at which point the rest of us (who depend on the same supply) are screwed.

  6. Drew says:

    odo –

    Your point is a fair one. But it seems to me the answer lies in the fast forward to post recession “equilibrium.” The Obama budget forecast shows a 50% increase in the annual deficit when unemployment returns to 5%. Setting aside the (dubious)accuracy of either their GDP or unemployment forecasts for the moment, that’s a structural change.

    At a blog called Econbrowser, Menzie Chin flogs relentlessly for Obama on the very point you make. But when queried by commentors on the out year structural change I cited…………dead silence. You can hear a pin drop….

  7. Steve Verdon says:

    Drew,

    Don’t expect much from Odograph. For example,

    I saw the mention of “what appears to be a downward trend in economic growth” but I did not see mention of the hundreds of billions pumped through AIG etc.

    This is incoherent gibberish. What does the latter have to do with the former considering that the former goes from 1946 to present and the latter is a very recent developement? AIG’s problems some how affected economic growth 25 years ago? WTF?

    Then there is this:

    Explain to me, reasonably, if an honest discussion of budget and deficit can really be made without recognizing special conditions?

    I see this as really nothing more than a cop out. If there are special conditions why not have that debt line moving back towards 40% or even lower after the “special condition” passes?

    I mean, I do remember that you are in favor of “automatic” counter-cyclical expansion of spending in recessions, through the mechanisms of unemployment benefits and welfare. Those themselves would produce a “somebody’s” deficit, regardless of who was President in “what appears to be a downward trend in economic growth”.

    And then there is this nonsense. Yes, but would it keep the debt that high? No.

    The intellectually honest thing to do now, is post the graph showing how much of the projected increase in debt is from Obama’s proposals and how much from entitlement spending.

    If you mean debt held by government it is growing at a much slower rate over the time period at the end of the graph. I don’t believe Medicare will start having big money issues for at least another 8 years, which is 2years outside this graphs range, and Social Security is even further out.

  8. odograph says:

    There you go, that’s the Steve I enjoy. He starts with an insult, in response to my carefully polite post.

    This is incoherent gibberish. What does the latter have to do with the former considering that the former goes from 1946 to present and the latter is a very recent developement? AIG’s problems some how affected economic growth 25 years ago? WTF?

    Uh, we have policies formed in response to a “worst since 1946” scenario?

    Yes, it is a very recent development.

  9. odograph says:

    I read Steve’s post carefully, twice, to be sure.

    I think it’s fair to say he doesn’t want to engage with ‘special circumstance.’

    Even if one did not support all those trillions in fiscal and monetary expansion, I think one should say “well, this special circumstance is putting a pig in the python, and that makes it difficult to judge what is and isn’t simply expansion of government.”

  10. odograph says:

    (I love “pig in the python” but I get the feeling that Steve and Drew don’t really appreciate my more creative metaphors 😉

  11. Steve Verdon says:

    Uh, we have policies formed in response to a “worst since 1946” scenario?

    Yes, it is a very recent development.

    As I said, incoherent gibberish given your inclusion of the comment on economic recoveries since 1946. What does AIG have to do with economic recoveries in the 40’s, 50’s, 60’s, 70’s, 80’s, 90’s and on? Pretty much nothing.

    I read Steve’s post carefully, twice, to be sure.

    I think it’s fair to say he doesn’t want to engage with ‘special circumstance.’

    I’ve already addressed the “special circumstance”, so keep up your attendance in the remedial reading course (now that’s an insult). Sure, special circumstances, two things:

    1. The circumstance wont last forever, how come Obama wants the debt to be so high long after the “special circumstance” has passed.
    2. Have you read anything by Robert Higgs; his thesis is that governments use “special circumstances” to expand the size and scope of government–permanently. Search the site here, I’ve discussed this before.

    I’m not responsible for your short attention span, poor memory.

  12. Drew says:

    You didn’t respond to the point, odo. Current circumstances are “special” only in that this recession is of the 1975 or 1981 flavor instead of, say, 1991.

    But the point remains, Obama’s own numbers (not mine) show a return to 5% unemployment (“special circumstances over, right?) but spending dramatically higher. This is a sea change, and can only be described as drunken sailor spending.

    It is testament to the slobbering adoration of the press that people do not know what is transpiring.

  13. odograph says:

    What you are saying just doesn’t add up for me.

    Near as I can tell, you are saying that you don’t see this recession as serious, and would have not have spent so much, therefore no one else could have had a different opinion or response.

    … an inability to put yourself in other shoes, even to test the logical consistency of their argument?

  14. odograph says:

    Note: I and others have talked about counter-cyclical spending. Obama’s counter-cyclical spending might be more extreme than I would have done, but I can see the structure of his argument.