Thursday, January 24, 2013

US Fiscal Policy Fine, Experts Say

Partisan economics is nothing new and every administration faces complaints from opponents that it’s either spending too much or too little, depending on the desired media outcome. In 2013, many economists agree that the U.S. fiscal policy is finally shaping up and that it’s a lack of employment and rising health care costs that are the real issue. Deficit hawks complain that liberals in big government are spending too much, but a comparison in real dollars shows the Bush years increasing the most of the last three administrations. Some even argue that President Obama is cutting too much and that a recovery requires more investment. For more on this continue reading the following article from Economist’s View

Peter Orszag:
Healthcare is America’s real problem, by Peter Orszag, Commentary, FT: Healthcare costs are the core long-term fiscal challenge facing the US... This is why the recent deceleration of these costs is so encouraging...
The good news is that recent developments in health costs are better than many appreciate. Cost growth has slowed dramatically...
Last year, the Congressional Budget Office estimated that the gap between revenue and expenditure in the next 75 years would amount to 8.7 per cent of GDP. Since then, enacted revenue increases and an improved underlying budget outlook have reduced the gap to perhaps 7.5 per cent.
Achieving the lower health-cost growth would knock another 2.5 per cent of GDP off, bringing the long-term fiscal hole down to 5 per cent of GDP – a greater impact than any policy change currently being debated in Washington. ...
Martin Wolf:
America’s fiscal policy is not in crisis: ...The federal government is not on the verge of bankruptcy. If anything, the tightening has been too much and too fast. The fiscal position is also not the most urgent economic challenge. It is far more important to promote recovery. The challenges in the longer term are to raise revenue while curbing the cost of health. Meanwhile, people, just calm down.
By the way, where were the deficit hawks during the Bush years? Here's what Martin Wolf means by "If anything, the tightening has been too much and too fast":

The deficit hawks don't want you to know this, but our biggest problem right now is not the deficit, it's jobs.
This blog post was republished with permission from Economist's View.

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