In a recent poll, 44% of people polled said they prefer the Republican’s stand on the deficit. Only 42% preferred Obama.
This means that the country remains split.
This means that gridlock prevails this month.
This means that the Republicans have not yet capitulated on hiking the debt ceiling. They will in May.
The present value of the federal government’s unfunded liabilities is over $222 trillion. So, there is no hope of balancing the budget until the federal government defaults. But in the phony Punch and Judy show that we call the United States government, the Republicans are a little bit ahead of Obama in the public’s view of the deficit.
About 44% of the public is sensible enough to know that the $85 billion worth of reductions in spending hikes that are scheduled for this fiscal year will not destroy the economy. They know that Obama’s cry that the country needs another increase in taxes is nonsense. This is marginally good news. At least with respect to an almost meaningless $85 billion reduction in spending increases in a federal budget that totals an estimated $3.8 trillion, the voters have got this much of the picture: it will not do any good to raise taxes.
The real showdown will come in late March, when the government quits playing games by juggling the budget. It will have to lay off people.
The government is playing the old trick of laying off workers that the public thinks we need, so as to force Congress to capitulate. The millions of faceless bureaucrats who labor in obscurity doing who knows what will continue to do whatever it is that they do. The government threatens to cut border patrol agents’ salaries by 35%.
My guess is that the border patrol will be able to hire replacements for a handful of agents who quit in protest. I could be wrong. But if the agents walk off the job, Obama, as Commander-in-Chief, can order the U.S. Army to man the border with Mexico. If he really wants to close the border, he can do this at any time. If he doesn’t do this in the face of a wave of resignations, then the border patrol issue is just a smokescreen. It’s part of a political game to see who blinks first: Boehner or Obama.
The showdown is mostly show, hardly anything down. There is nothing of substance at stake, other than political brownie points over who blinks first.
The economy will not crash just because a bunch of overpaid federal bureaucrats have their salaries cut. Better yet, they may quit. They will return to the private sector, where they can become productive for the first time in their careers. They will cease being a drain on the economy.
Keynesians are on the sidelines, wringing their hands in desperation. They think this slight decline in federal spending increases is some kind of Rubicon that Congress has crossed. They think that the economy is headed for ruin because of these cuts in spending hikes. It isn’t. It is headed for ruin because the cuts are so minimal.
So, to this extent, I am enjoying the show. Anything that sends Paul Krugman into apoplexy isn’t all bad. He is appalled.
The right policy would be to forget about the whole thing. America doesn’t face a deficit crisis, nor will it face such a crisis anytime soon. Meanwhile, we have a weak economy that is recovering far too slowly from the recession that began in 2007. And, as Janet Yellen, the vice chairwoman of the Federal Reserve, recently emphasized, one main reason for the sluggish recovery is that government spending has been far weaker in this business cycle than in the past. We should be spending more, not less, until we’re close to full employment; the sequester is exactly what the doctor didn’t order.
The liberals’ favorite economic clown got out his make-up once again, painted on his famous Emmett Kelly frownie face, and headed out to entertain the readers of the New York Times with another column. It is always a treat to see him perform. It reminds us that Keynesians never saw a government deficit they didn’t like.