The economic illiteracy of economists: Alan Auerbach, who put up a graph of the United States' rising debt-to-GDP ratio, and warned of dire consequences if Congress didn't do something about it. Yawn….
Alan Blinder… describ[ed] the public discussion of the US national debt as generally ranging from "ludicrous to horrific"…. [I]s there any urgency (to reduce the deficit or debt)? No…. [W]e need more fiscal stimulus, preferably spending that focuses on actually creating jobs. Amen…. [S]hould we focus on the next decade? No, he said, and noted that the Congressional Budget Office's (CBO's) budget deficit projections over the next decade are about 3.6% of GDP, which is not much to get agitated about…. [I]s government spending the problem? No, he said, it's healthcare costs…. [I]s the public really up in arms about the deficit? No… they care more about… jobs. As they should. Blinder concluded that since this is an election year, we can forget about having any fact-based discussion of these issues in 2012. Happy New Year, he said….
But a rapid descent into hell was imminent. Former CBO director Douglas Holtz-Eakin was next…. The United States has all the characteristics of countries that run into trouble, he said. Then he warned that the US is going to end up like Greece. This is one of the dumbest things that anyone with an economics degree can say….
At this point, it was clear that this panel, other than Blinder, was living in a dystopian fantasy world. Next up was Rudy Penner…. He complained about the polarisation of the political process, which prevents the two major parties from reaching an agreement. It's not partisanship, he said: House speaker Tip O'Neill and President Ronald Reagan knew how to be partisan, but they were able to reach agreement on the 1983 social security package and the 1986 tax reforms. And yada yada….
The last panelist was Alice Rivlin of the Brookings Institution… agreed with Blinder that we need more stimulus. But we can only get this if we agree to long-run spending cuts – including social security…. This is a political strategy that is sure to end in disaster, given the prevailing state of misinformation and disinformation….
I called attention to Blinder's presentation of the long-term budget problem as almost completely a problem of the rising price of healthcare…. [A]re Americans so inherently different from other nationalities that we can't have similar healthcare costs? And if not, then why are we talking about long-term budget problems – instead of how to fix our healthcare system? None of the panelists offered a serious answer…. The United States pays about twice as much per person for healthcare as other high-income countries – and still leaves 50 million people uninsured…
I understand that Douglas Holtz-Eakin is now playing for Team Republican. I understand that he gave good internal advice to his bosses in the George W. Bush administration in the 2000s. But he should not be destroying his and his political masters' potential 2013 policy running room in this way: come 2013 he may well want to forget as quickly as possible his current claims that the U.S. is "like Greece". For him to repeat the talking point right now is long-term stupid politically and both short-term and long-term stupid technocratically.