Budget Confusion Everywhere

From Dean Baker at Center for Economic and Policy Research

The debate around the budget is getting ever further removed from reality. As every budget expert knows, the reason that we have seen large budget deficits in the last five years is that the economy plunged following the collapse of the housing bubble.

Unfortunately, rather than deal with the reality – that we need deficits to sustain demand in a context where the private sector will not do it – the politicians in Washington have gotten hysterical. This is like complaining about our use of water when the school is on fire with the kids still inside.

… In spite of the hysterics coming out of Washington, the interest burden of the debt is near a post-war low. Even if no further cuts are made, it is not projected to get back to its early 1990s level for more than a decade.

In this context, it is unfortunate that President Obama has proposed a budget that has substantial cuts to Social Security. The vast majority of seniors are already struggling. The proposed cuts would be a reduction in their income of more than 2 percent. By contrast, his tax increase last fall cut the after-tax income of the typical wealthy household by less than 0.6 percent.

The budget should be focused on expanding the economy and creating jobs, ideally through more spending in infrastructure, education and research. It should also include funding for state and local governments to reverse layoffs and cutbacks that have slowed growth and raised unemployment.

Unfortunately, President Obama has accepted the agenda of the Washington elite…

In the Bay Area, new congressman Jared Huffman has signed with 35 others that he will not vote for the so-called chained CPI, a prominent feature of the Obama budget that would cut back on Social Security benefits for those who have already contributed during their life times.  Isn’t there an implied contract here?

The GOP Budget: Fraudulence and Cruelty

Krugman on April first was not fooling around when he denounced the GOP House budget:

The big bad event of last week was, of course, the Supreme Court hearing on health reform. In the course of that hearing it became clear that several of the justices, and possibly a majority, are political creatures pure and simple, willing to embrace any argument, no matter how absurd, that serves the interests of Team Republican.

But we should not allow events in the court to completely overshadow another, almost equally disturbing spectacle. For on Thursday Republicans in the House of Representatives passed what was surely the most fraudulent budget in American history.