Wednesday, January 28, 2009

The New Low Hurdle

As everyone else tightens their belts, US government anti-reason is crafting a multi-grazillion dollar expansion in spending. The first non-story is that only 12% of the bill is going towards projects that could remotely be considered stimulus-typey. The second non-story, only because it is being flatly denied at this point, is the question of whether all this "found" money to pet projects of the party will be considered the new baseline in future budgets.
The larger fiscal issue here is whether this spending bonanza will become part of the annual "budget baseline" that Congress uses as the new floor when calculating how much to increase spending the following year, and into the future. Democrats insist that it will not. But it's hard -- no, impossible -- to believe that Congress will cut spending next year on any of these programs from their new, higher levels. The likelihood is that this allegedly emergency spending will become a permanent addition to federal outlays -- increasing pressure for tax increases in the bargain.

And, why not? If there is some positive return to all this stimulus, why not repeat it every year? Why not double it every year?

If the multiplier is positive, is there a diminishing return at some point? What point? How do you know that point is beyond this trillion-dollar hootenanny?

What prevents raising the baseline? There's nothing mechanical stopping it. There are no repercussions. You are electorally safe. No one will even pay attention to your denials today.

Of course it will be the new baseline.

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1 Comments:

Blogger bmcmolo said...

Amen.

12:22 PM  

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