What the president’s economic report leaves out
The report by the president's Council of Economic Advisers makes no mention of 'tax reform' or 'entitlements.'
Today I got a note from Bruce Bartlett pointing out that in the new Economic Report of the President there is no mention of the terms “tax reform” or “entitlements.” (Bruce did a search of the entire pdf document.) But that doesn’t surprise me because even if the report had actually discussed better ways to raise revenue or to trim the costs of the Social Security and Medicare programs, it would have judiciously avoided using the dirty words “taxes” or “entitlements.”Skip to next paragraph
'EconomistMom' (Diane Lim Rogers) is Chief Economist of the Concord Coalition, a non-partisan, non-profit organization which advocates for fiscal responsibility, and the mom of four (amazing) kids to whom she dedicates her work. She’s been blogging since Mother’s Day 2008.
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More disappointing is the fact that it wasn’t just semantics. The President’s Council of Economic Advisers really did avoid the substance of the “tough choices” on tax and spending policy–you know, all that “fiscal responsibility” and “living within our means” that the President loves to mention only as an abstract virtue and never as a specific proposal.
And the CEA even went beyond not emphasizing the need for tax and entitlement reform. With their main theme for this year’s report being “The Foundations of Growth” (the title of their Chapter 3), they had the nerve to completely leave out an explanation of how deficits very directly harm economic growth by reducing public and national (public plus private) saving. The omission is obvious from the first sentence of the second paragraph in Chapter 3, which says:
At the core of the Nation’s economic growth is our capacity to innovate, educate, and build.
…but then goes on to devote the rest of the chapter to the innovating, educating, and building (the “investing”), just assuming we already have the capacity (the “saving”) to do all that innovating, educating, and building. But we don’t have either the private saving or public saving to fund those investments, so we have to be talking about borrowing to finance those investments. And the problem with borrowing to finance even the kind of spending that may encourage economic activity is that there’s no guarantee that we will come out ahead on net, after we have to repay the debt (with interest).
During the Clinton Administration we learned that reducing the federal budget deficit contributed positively to the economy’s productive capacity by boosting national saving. In President Clinton’s final economic report, we explained that the direct, positive boost to public saving was barely offset by any decline in private (household and business) saving.