Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Monday, December 11, 2006

Max Sawicky Lays Down the Populist Party Line

He writes:

THE FIVE BOXES OF POPULIST ECONOMICS | TPMCafe:

  1. Trade is most prominent, but it may be the least important of my top five. Measures to protect better-paying jobs in the U.S. are feasible but only promise results to a limited extent.
  2. Deficit dementia. The dirty secret in economic policy is that most economists, radical, liberal, moderate, and conservative, understand that the Federal budget need never be balanced, that moderate deficits can be sustained indefinitely. The implications of tolerating deficits of two percent of GDP -- over $200 billion in today's terms -- rather than a deficit of zero are huge.
  3. Social Security. Forget "there is no crisis," the clarion call of anti-Bush campaigners. The new slogan should be, there is no problem. No benefit cuts are necessary for the foreseeable future. If anything, there is a projected shortfall of income tax revenue required to repay debts to the Trust Fund, as per current law, as well as for maintaining other Federal programs.
  4. Health care. There is no crisis. There is, rather, huge projected growth in demand for an ever-expanding menu of treatments, and the burden of managing efficient, ample, and fair public sector finance of this care.
  5. The Imperial Fed. Our true economic overlords, the Federal Reserve Bank's Board of Governors, have arrogated to themselves the right to ignore their mandate for full employment, elevating slow-growth anti-inflation policy over the unparalleled benefits of tight labor markets.

Trade is important, but in the grand scheme of economic security, it is also a pigeon-hole.

I think that (5) misreads the Federal Reserve--both what it can do and what it is doing. And I do not believe that (3) and (2) can peacefully coexist for long. But otherwise it seems a fine starting point for discussions and for frank and productive exchanges of views.

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