Brad DeLong’s summary of Barack Obama’s budget ideas is useful (though caveat emptor here, there’s rounding so the numbers don’t add up right):
— Restore high-bracket tax rates to Clinton-era levels: $1T — Cut tax-expenditure spending through the tax code: $1T — Cut health care spending: $0.5T — Cut other mandatory spending by: $0.4T — Cut security spending: $0.4T — Cut non-security discretionary spending: $0.8T — Those reductions will carry with them a reduction in net interest of: $1.2T
Some of these are fine however. However, the basic premise continues to be weird. At the moment the international investment class is prepared to lend money to the United States of America at low interest rates. What’s more, at the moment the United States of America has a lot of infrastructure needs. Furthermore, at the moment the United States of America has a large number of unemployed people. The logical course of action would be to accept international investors’ desire for us to increase our volume of low interest borrowing in order to put people to work on useful infrastructure projects. Near the end of his speech, Obama said that “doing nothing on the deficit is just not an option.” But it is an option! It’s not an option for Spain, which is facing sky-high borrowing costs. It’s not an option for Portugal, which just accepted a bailout from the European Union. But it is very much an option for the United States of America. It’s a good option, an appealing option, an option that will increase our wealth over the long term. It won’t be an option forever, but that’s all the more reason to exercise the option while we can.