Thursday, August 10, 2006

Max Sawicky is wrong

At this point, I frankly have more respect for the centipede I crushed on the staircase at my kids' behest just a few minutes ago than I have for Joe Lieberman. The centipede, while unwelcome in our home and almost indecently multi-legged, at least was not sleazily exploiting terror problems, which Bush has made worse, as evidence that anti-Bush sentiment is treason. (Indeed, I don't recall the centipede's mentioning Bush at all, although then again I didn't give it much time.) But still, let's give Joe one iota of credit for something from a few years ago.

In 2003, Lieberman introduced S. 1915, the Honest Government Accounting Act, attempting to create budget rules, based on the log-term fiscal gap, that were designed to push the U.S. government back towards solvency. The legislation was far from perfect - and characteristically, was tilted towards the Republicans (institutionally and their policy preferences) in a couple of telling ways - but still I'd call it one of the more responsible and far-sighted legislative efforts of recent years.

Today Max Sawicky takes a shot at this legislation, calling it bad economic policy that will stay even if Joe goes.

Alas, I think it will go away and stay away, whereas Joe shows signs of sticking like a Greenwich deer tick.

With all due respect, which I do have for Max Sawicky, he is wrong, as in w-r-o-n-g. He thinks we shouldn't do long-term fiscal projections. I hope he doesn't live his life that way (e.g., is he planning to retire some day? Or send still-young kids to college?). Of course the future is uncertain, but that's another way of saying it's risky, and to the risk-averse this makes the future problems bigger, not smaller, than if their scope were certain.

Herewith Max:

"The saving grace of this novel regime of fiscal policy is that you can eliminate a $72 trillion 'present value' liability with a law mandating the dedication of all future revenues from the colonization of Jupiter. If fact, in the expectation that such a colonization will bring in even more revenues, one could offset this extra dough with new spending, right now. Honestly."

Exactly right, and rightly so, if in fact future revenues from the colonization of Jupiter have an expected present value of $72 trillion. I think it's fair to say they are more like zero, and I propose to count them today at exactly that value.

If Max's point is that politically influenced estimators will do bogus things when they look long-term, I would respond: OK, let's have good estimates instead, by independent people, and if he thinks short term estimates are better he must have been delighted with the recent Republican gimmick of using tax cuts to pay for tax cuts (i.e., conversion of traditional IRAs into Roth IRAs, raising money short-term but losing billions over time), which was based on the short time horizon that he prefers.

Max also complains that long-term accounting is "fuel for bad, radical reforms in Social Security and Medicare that would take effect well before the Jupiter bonanza." Again wrong. Take Bush's Social Security "plan" of 2005. Long-term accounting showed that it did nothing to reduce the fiscal gap. Or take Bush's prescription drug benefit. Long-term accounting showed that it cost an estimated $18 trillion, not the phony-baloney 10-year estimate that was held down through deferred implementation. And as for the Medicare/healthcare crisis, closing one's eyes is not going to make it go away. Better gradual smaller cuts than deferred but ultimately bigger cuts.

You have to separate out the analytics from the politics a little more crisply than Max seems inclined to.

Sorry for the peevish tone, Max. I'm really angry at other people (Senator Joe for one), not you. But I really don't see why thoughtful and responsible people on the left can't accept the value of rational long-term budget planning. I thought it was the Bushes and Liebermans of the world who reject rationality when they don't like the answers it gives them.


Max said...

Response is here:


Sandwichman said...

Dan Shaviro wrote, "Of course the future is uncertain, but that's another way of saying it's risky..."

Aaaaaa! Uncertainty is just another way of saying risk? Tell that to Ellsberg.

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