The Fact of My Ignorance

Just a few comments on President Obama’s press conference tonight, it will be quick because I’ve got a lot to study.  I’ve got the whole thing posted at the end of this article but I wanted to highlight this clip where he addresses issues surrounding his proposed budget.  Its short, and if you’re concerned at all about the 3.6 trillion budget the administration recently proposed its a good one to watch.

I’m probably going to do a larger post about the budget at a later date but I think he does a great job of hitting some of the common concerns head on.  One thing he talks about is that, like with the stimulus plan and the bank bailout, we have to remember that it’s not a choice between increasing the deficit and not increasing the deficit!  The deficit will increase over the next several years.  Its a matter of choosing the path that will increase it the least.  And we also have to remember that a slow-growing, or shrinking, economy reduces government inflows and increases our deficit significantly.  The idea is to boost spending in ways that will stimulate the economy such that it offsets the costs of that spending.

So I don’t think we can just say, “why don’t we spend less to decrease the deficit?”  Cutting valuable spending will likely increase the deficit over the long term.  We need to look specifically at the various spending proposals and decide which projects provide more benefit than they cost, and which ones don’t.  That is what I think we should be debating.  I haven’t combed through the budget yet and I can’t say whether each or any of the new spending proposals are worth it or not, but I just thought it was important to point out that the outrage many people feel about the impending deficit increases may be somewhat misdirected.

Of course we know that the budget is at least reasonably well put together because it decreases the projected deficit.  Everyone’s all up in arms at the CBO’s projected 9.7 trillion increase in the deficit over the next 10 years (and that is quite a scary thing), but remember that Obama inherited a 1.2 trillion yearly deficit from the previous administration.  Meaning if his tax and spending proposals were exactly as successful as Bush’s we’d see an increase in the deficit of 12 trillion over the next 10 years.  So the budget that this administration has proposed seems to be an improvement.

Also, I’m still looking for independent verification of this but in this clip Obama says that his budget calls for less non-defense discretionary spending as a percent of GDP than any budget since the 60′s.  If that’s true its fairly impressive, and it tells us that it’s not an increase in spending that’s causing these deficits, it’s more likely the tax cuts that the budget calls for.  But of course you don’t see many people getting all bent out of shape about there being too many tax cuts.  Though considering the questionable value of tax cuts in our current recession (see The Trouble With Tax Cuts) maybe they should be.

Still, the deficit projections are very troubling.  I think its unlikely that all the elements of the budget as it currently stands are worth it.  I think more attention needs to be devoted to trimming those things out.  We need to keep spending programs that will pay for themselves in the near and medium term but perhaps the programs with only very long term returns may need to be forestalled.  And some projects which seem to be designed more for correcting societal ills or increasing social justice, while they may be worthy efforts, may also need to be put off.  I hope the budget can be modified as it makes its way through congress such that it can lessen the severity of our deficit growth projections while maintaining those worthwhile efforts that will pay for themselves.  Stimulus isn’t our only priority right now, but I recognize the deficit needs to take a little bit of a back seat at the moment.  Still, addressing our ballooning deficit should be our next priority once the economy is on more solid footing, and we don’t want to make that task any more challenging than its already going to be.

Anyway, as promised, here’s the full press conference for those who are interested.

Visit msnbc.com for Breaking News, World News, and News about the Economy