Is California the New Sign of Deficits Down?

Front page news today and yesterday of Governor Jerry Brown’s announcement of a budget in which there is no deficit.

It’s the first time since 2007 that leaders at the Capitol haven’t had a deficit to contend with and the first time since the late 1990s that the outlook over future years shows surpluses instead of deficits.


Paul Krugman takes note and slams the deficit scolds as he calls them:

 the deficit scolds will of course go wild. They have staked their careers on crusading against supposedly intractable deficits, and they have their hearts (and more important, their wallets) set on exploiting the alleged fiscal crisis to dismantle social insurance programs. Good news will be a blow to everything they want, and will be furiously and vigorously denied.

But once again: deficits are receding as an issue before our eyes.

Bonnie Kavoussi at Huffington Post, picks up an earlier Krugman post to expand the theme:

“Reasonable projections do not, repeat do not, show anything resembling the runaway deficit crisis that is a staple of almost everything you hear, including supposedly objective news reporting,”

showing a Center on Budget and Policy Priorities graph.

Deficit Scolds Getting Shrill as the Story Falls Apart

From Krugman…

… the deficit scolds aren’t giv­ing up. Now yet an­other or­ga­ni­za­tion, Fix the Debt, is cam­paign­ing for cuts to So­cial Se­cu­rity and Medi­care, even while mak­ing low­er tax rates a “core prin­ci­ple.” That last part makes no sense in terms of the group’s os­ten­si­ble mis­sion, but makes per­fect sense if you look at the ar­ray of big cor­po­ra­tions, from Gold­man Sachs to the United­Health Group, that are in­volved in the ef­fort and would ben­e­fit from tax cuts. Hey, sac­ri­fice is for the lit­tle peo­ple.

So should we take this lat­est push se­ri­ous­ly? No — and not just be­cause these peo­ple, aside from ex­hibit­ing a lot of hy­poc­risy, have been wrong about ev­ery­thing so far. The truth is that at a fun­da­men­tal level the cri­sis story they’re try­ing to sell doesn’t make sense.

The Fiscal Cliff and Its Perpetrators

Pardon me for asking a stupid question but, if the Fiscal Cliff is looming, not because of hurricane force winds in the Gulf, or an asteroid from the far reaches of the Milky Way, but because a craven congress voted to create it — why can’t they unvote it?  Everybody knows, if the automatic spending cuts are made with a broad-ax instead of a scalpel, misery will bleed from the cuts– in gushers.  So, vote to rescind the original vote and set about doing what should have been done in the first place.

Nevermind, it won’t happen, I know.

What is likely to happen of course is that those who have the biggest stake, and know it, will weigh in with dollar-amplified voices to improve their own positions and ignore the larger issues of redress of equality and equal opportunity which are the real sources of America’s long economic growth.

It is not good news that Erskin Bowles and Alan Simpson and Pete Peterson, along with the Business Roundtable are ginning up a slew of television advertising in an attempt to frame the debate.

The Campaign to Fix the Debt, a new group with a $40 million budget whose backers include Jeffrey R. Immelt of General Electric and David M. Cote of Honeywell, will run more than a million dollars’ worth of advertisements. The spots take their cue from well-known ads by the likes of Nike and Dunkin’ Donuts and feature slogans like “Just Fix It” and “Time to Fix the Debt.”

Mr. Immelt and Mr. Cote also feature prominently in a more traditional campaign by the Business Roundtable, which represents Fortune 500 companies and is one of Washington’s most powerful lobbying groups.

The Business Roundtable’s effort, set to begin on Tuesday, has a budget of close to half a million dollars, and is focused on news media in the Washington area, including outlets like Politico as well as conservative talk radio shows.

[The Fix the Debt campaign was created by Erskine B. Bowles and Alan K. Simpson, who were chairmen of a presidential commission charged with developing a blueprint for fiscal change and deficit reduction in 2010, and the group backs many of their recommendations.]

… Both the Business Roundtable and the Fix the Debt campaign suggest they could pay for the corporate rate reduction by “broadening the base,” closing loopholes and eliminating many deductions. Some critics say they doubt that would bring in enough revenue to pay for reducing taxes on corporations, eventually shifting some of the burden to smaller businesses and individuals.

Advocates for low-income and older Americans have also been harsh critics of the Simpson-Bowles plan, saying it would keep tax rates on businesses and wealthy Americans at levels below the historical average, and underwrite that by sharply cutting Social Security andMedicare.

Fix the Debt is also backed by Peter G. Peterson, a longtime deficit hawk who has advocated cutting Social Security and other elements of the safety net to pay for debt reduction. Other corporate backers include Mark T. Bertolini, the chief executive of Aetna, and Gregory Q. Brown, the chief executive of Motorola.

NY Times: Nelson D. Schwartz and David Kocieniewski


Krugman warns us about some of these players:

Consider the early-2011 award for “fiscal responsibility” that three of the leading deficit-scold organizations gave to none other than Paul Ryan. Then as now, Mr. Ryan’s alleged plans to reduce the deficit were obvious flimflam, since he was proposing huge tax cuts for the wealthy and corporations while refusing to specify how these cuts would be offset. But in the eyes of the deficit scolds, his plan to dismantle Medicare and his savage cuts to Medicaid apparently qualified him as a fiscal icon.

And how did the deficit scolds react when Mitt Romney served up similar flimflam, with Mr. Ryan as his running mate? Well, the Peter G. Peterson Foundation is deficit-scold central; Peterson funding lies behind much of the movement. Sure enough, David Walker, the foundation’s former C.E.O. and arguably the most visible deficit scold in America, endorsed the Romney/Ryan ticket.

… I don’t know how seriously to take the buzz about appointing Erskine Bowles to replace Timothy Geithner. But in case there’s any reality to it, let’s recall his record. Mr. Bowles, like others in the deficit-scold community, has indulged in scare tactics, warning of an imminent fiscal crisis that keeps not coming. Meanwhile, the report he co-wrote was supposed to be focused on deficit reduction — yet, true to form, it called for lower rather than higher tax rates, and as a “guiding principle” no less. Appointing him, or anyone like him, would be both a bad idea and a slap in the face to the people who returned President Obama to office.