Tuesday, September 13, 2011

"Go big" letter on deficit reduction

I am one of the more than 60 signers (or, if you prefer, signatories) of a letter to the Joint Select Committee on Deficit Reduction that urges the Committee to "'go big' and develop a large-scale debt reduction package sufficient to stabilize the debt as a share of the economy."

With the studied generality that was needed to get so many signatures, which range across the ideological spectrum from about the medium left to the medium right, the letter continues:

"We believe that a go big approach that goes well beyond the $1.5 trillion deficit reduction goal that the Committee has been charged with and includes major reforms of entitlement programs and the tax code is necessary to bring the debt down to a manageable and sustainable level, improve the long-term fiscal imbalance, reassure markets, and restore Americans’ faith in the political system.

"While we have differences of opinion about the specific policies that should be included in any plan, we all agree that a large-scale, multi-year debt stabilization package is necessary to deal with the fiscal challenges facing the nation."

I was willing to sign the letter because it doesn't contradict (although it also doesn't endorse) the view I share that in the short run we need to boost consumer demand. Also, I certainly agree about the need for entitlement reform and tax reform, although (as discussed here) I would not include rate reduction in the latter.

And while I am very skeptical that anything good is likely to come out of the current political environment in which the Joint Select Committee on Deficit Reduction is operating - requiring me to swallow some qualms about the "go big" advice in signing the letter - I concluded as follows:

(1) waiting for the political environment to improve is not very promising, as it may just keep on getting worse, and

(2) as I discuss here, the threat of fundamental political dysfunction leading to default is great enough that it wouldn't be prudent (as Bush Sr. might have put it) to favor sitting tight and waiting for a more propitious time.

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