Friday, November 16, 2012

Fiscal Cliff: meh

Russ Roberts has had several thought-provoking tweets recently (he's @EconTalker on twitter).

Professor Roberts was my favorite economist even before he invited me to be on his podcast, because he is always rational and skeptical, especially about data or ideas that reinforce his own biases. Listen to a few episodes of EconTalk to hear what I mean.

Interesting tweet #1:
Fiscal cliff will lower federal spending from $3.8 trillion to $3.7 trillion. Oh the horror!
A 100-billion-dollar fiscal cliff sounds like disaster. 3.8 to 3.7... meh.  Lets see, the last time the Federal budget was 3.7 trillion dollars was... umm... well, according to the budget office, Federal spending this year is about 3.6 trillion dollars. So if we go over the Fiscal Cliff, the Federal government will be spending a bit more next year than this year.

Thought-provoking tweets numbers 2, 3, and 4:
A tax cut without a spending cut is not a tax cut. A tax increase with a spending cut is a tax cut.
Spending must be covered by either taxes today or taxes tomorrow (borrowing). So a tax cut w/o cutting spending is not a tax cut...
Spending is paid by taxes today or taxes tomorrow (debt). So a tax increase coupled w/spending cut is a tax cut. 
Politicians of both parties love to promise free lunches for everybody. ObamaCare will save us money! Taxpayers will make money on the auto and Wall Street bailouts! Tax cuts pay for themselves! Interest rates are Historically Low, so now is the time to borrow and spend even more!

I hate sounding like a grumpy old curmudgeon, but none of that is true. I still think:
...the best the government can do is create policies that will encourage and reward productive behavior, and then stand back and get out of the way. 


Anonymous said...

What the tweets really say to me 'we will spend what we have not got yet.'

The payment for such thing is proved to be overpriced by history.

Anonymous said...

As long as 'productive behavior' doesn't mean funding sociopathic corporations such as armament trading companies or enslaving millions with crappy wages and miserable lives...