I just discovered the NYT’s Debt Reckoning blog.
The White House’s response to the GOP’s ‘counteroffer’ (emphasis added):
“The Republican letter released today does not meet the test of balance,” said Daniel H. Pfeiffer, the communications director. “In fact, it actually promises to lower rates for the wealthy and sticks the middle class with the bill. Their plan includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve.”
But hey, it’s a counteroffer and Obama’s people are obviously partisan so maybe we should take it seriously, right? Maybe not… Jared Bernstein with his quick look assessment.
Oh, and Vanguard Chairman Bill McNabb blows his credibility:
Interviewer: The United States faces a looming debt crisis. What’s your perspective on this issue?
Mr. McNabb: We need to get our fiscal house in order. The growing deficit level is worrisome on a few fronts. As the deficit grows, government spending will crowd out private spending, interest rates will rise, and correcting the situation will be incredibly painful to go through. We’re witnessing this play out in other parts of the world, with austerity measures or with massive currency devaluations.
McNabb apparently doesn’t realize that we’re up against zero lower bound and that things are different when we’re in a liquidity trap compared to more normal times. Interest rates rising? Where does he come up with that? The rates are going down. (And, no, rates are not being kept artificially low because the Fed is buying up treasuries.) What’s the mechanism by which they will rise? People are damn near paying the Government to hold their money. That’s what The Market is deciding. Does this not register on Mr. McNabb? Is there any plausible reason to believe that people – or, more accurately, organizations and institutions with a lot of cash – won’t continue this behavior so long as the economy is in the tank? Anyone?… Anyone?…
Moving on… The data also show that introducing austerity measures during a recession is awful economic policy. It’s not just bad policy from the standpoint of inflicting human suffering but it tanks the economy to boot! Once more for clarity: IMPLEMENTING AUSTERITY MEASURES DURING A RECESSION DOES NOT “CORRECT THE SITUATION”. THEY JUST MAKE THE PROBLEM WORSE. DON’T DO IT!
“The boom, not the slump, is the right time for austerity at the Treasury.”
– John Maynard Keynes (1937)
And can we please please please put this ‘crowding out’ crap to bed? Please?