Could Someone I Trust Please Tell Me Not to Worry About the Macroeconomic Impact of Fiscal Contraction in 2012?
The Changing Shape of the Future

Even the Best of the Republicans Are Pretty Awful...

Alan Kling and Greg Mankiw do Tyler Cowen no good service in recommending that he read Keith Hennessey--who is in full spin entropy-maximization mode, striving to reduce the level of the debate.

And Tyler does his readers no good service in reproducing Hennessey:

Marginal Revolution: Obligatory budget post: I keep on hearing about a "pivot," but where is it?  Via Greg Mankiw and Arnold Kling, here is Keith Hennessey:

We can draw five important conclusions from this graph:

  1. At 8.3% of GDP, the proposed budget deficit for 2011 is still extremely high.
  2. President Obama is proposing larger budget deficits than he did last year.
  3. For 2011, the most relevant year of this proposal, the President is proposing a budget deficit that is 2.3 percentage points higher than he did last year (8.3% vs. 6.0%).
  4. Using his own numbers, the President’s proposed budget deficits will cause debt as a share of the economy to increase. 4.Under the President’s proposal, budget deficits begin to increase as a share of the economy beginning in 2018.

Adding further detail to (4), the President’s own figures show deficits averaging 5.1% of GDP over the next 5 years, and 4.5% of GDP over the next ten years.  They further show debt held by the public increasing from 63.6% of GDP this year to 77.2% of GDP ten years from now.  I think it’s a safe assumption that CBO’s rescore of the President’s budget will be even worse.

Left out of Hennessey's "analysis" i the reason that an 8.3% of GDP deficit is warranted: that the economy is very weak.

Left out of Hennessey's "analysis" is the reason that President Obama projects bigger deficits this year than he did last year--that the economy is extremely weak, and is much weaker than we expected it to be, and when the economy is weak the deficit goes up as revenues fall and social-insurance spending rises: a year ago the administration expected the unemployment rate now to be 7.7%, but it's 10.0%; a year ago the administration expected the unemployment rate at the start of fiscal 2011 to be 7.0%, but now it expects it to be 9.8%; a year ago the administration expected the unemployment rate at the start of fiscal 2012 to be 6.4%, but now it expects it to be 8.9%.

You won't learn any of this from Hennessey.

And, of course, left out of Hennessey's "analysius" is the explanation that the weakness of the economy is also the reason that the debt-to-GDP ratio is projected to climb over the next five years: the debt-to-GDP ratio ought to climb during periods of national emergency--resisting an invasion, fighting a major war, suffering a depression, et cetera. Hennessey and his peers in the George W. Bush administration share with the Reagan and George H.W. Bush administrations the singular distinction of having run the only administration to raise the debt-to-GDP ratio without resisting an invasion, without fighting a major war, without suffering a depression.

The only one of Hennessey's points that is not overspun well beyond the point of being misleading is (5): starting in 2018 our long-run fiscal crisis does knock on the door. It would have been nice if Newt Gingrich had helped Bill Clinton deal with it back in 1995. It would have been nice if George W. Bush had dealt with it rather than amplified it in 2001. It would be nice if Republicans like Keith Hennessey would help Barack Obama deal with it now...