Deficits Bad?

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Johnathan Pearce cites Andrew Sullivan’s critical observations about increased federal spending under George W. Bush. Sullivan makes a good point. However, Pearce goes Sullivan one better and decries federal deficits, which are not quite the same issue.

Deficits are actually an important constraint on federal spending. In the ideal world we would have a small and balanced federal budget, but our more likely alternatives are a large federal budget with a deficit or a large federal budget with a surplus. A surplus functions much like a silent tax increase whose proceeds will be spent by Congress (as happened in the 1990s), whereas a deficit leads mainly to additional federal borrowing — which is less destructive to productivity and incentives than are tax increases and may itself create pressure for reduced spending. Surpluses allow legislators to increase spending without incurring the political costs associated with explicit tax increases, while deficits create political pressure to spend less. The question of whether to balance the budget is not trivial, but the main goal should be to reduce the overall level of government spending. Ironically, deficits, because of their negative political consequences, may advance this goal most effectively.

Politicians tend to like surpluses and dislike deficits. That should tell us something.

Thanks

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Brian writes that us Chicago Boyz are sort of OK for a bunch of conservatives, which sounds like praising with faint damns. We’re just happy that we didn’t end up on this list, to which he also links.

I Don’t Like Making Predictions

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Last May I made a bet with the lovely Diane that the U.S. would attack Iraq before the end of 2002. While it looks like I will soon be right about the invasion, I was wrong about the timing, and timing was the issue. I blew it due to my usual excessive overconfidence.

Meanwhile Lex has been trying to talk me into publishing my predictions for 2003. He himself has already done so in a masterful post, and I predict that many of his predictions will prove accurate. He has a good track record, especially WRT politics. (He is typically less overconfident than I am, though our respective overconfidence levels may be converging as we age.) I have a lousy track record, especially on issues that affect me emotionally. And I find that by making a prediction on any topic I tend to increase my feeling of having a stake in a particular outcome, which makes my judgment even worse. The honest best that I can usually do, prediction wise, is along the lines of: “There is a greater than even chance that X will occur if Y occurs.” But nobody wants to read predictions that sound like that. So with these caveats in mind, I am willing to make a couple of straightforwardly vague prognostications:

– There will be surprises in the war against radical Islam. Most of these surprises will be bad.

– Unexpected stuff will happen around the world. As always.

– The U.S. monetary system will show an increasing bias towards inflation during the next year or two.

That’s about the best that I can do. If anyone wants to make some money, I am available to take the other side of bets.

More on the Tony Blair Interview

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I read about 1/3 of the transcript from the Q&A. Blair handled himself well. The interviewer and the audience, if sincere, are twits. I can’t imagine the audience is representative of majority opinion over there. It’s probably representative of elite opinion, though. I hope that I am not naive to be so optimistic. Also:

– I was astonished by the high proportion of questioners from the audience who assumed that UN fiat takes precedence over decisions made by their own elected government.

– Paxman’s interviewing style is great. I wish we had journalists like him here in the States. So what if he’s rude. One of the press’s most important functions is to serve as a check on government. You can’t do that if you’re always deferential. Yet journalists who ask difficult questions of politicians are exceedingly rare. They are discouraged by the j-school mentality, with its emphasis on “access” — mustn’t risk losing it by antagonizing interviewees — and guild-like hostility to reporters who rock the boat. (O’Reilly isn’t a good counterexample, because there’s only one of him and he’s easily avoided by pols who don’t want to face his questions. Also, he is often unprepared.) How long would Clinton have lasted if he had been met at every press conference by Paxman-like reporters asking him, repeatedly, if he had raped Juanita Brodderick?

Tony Blair on the BBC

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One of my friends in the UK send along this link to the BBC’s interview with Tony Blair about the upcoming war with Iraq. (click on the phrase “Tony Blair’s Newsnight interview point by point” for video).

It was interesting for an American viewer who does not watch TV at all to see this. The interviewer was actually openly rude and interrupted constantly. Really boorish. I don’t think anybody should have to put up with that, let alone a democratically elected leader. But my wife, a veteran BBC viewer, tells me that is the done thing over there – harsh, cross-examination-style interviews of politicians. I also noted that the interviewer baldly misstated various facts, apparently to get a rise out of Blair, as well as taking a really insulting tone. The hand-picked audience consisted only of opponents of the war. The ideological lefties were pretty easy for him to deal with. But the “regular guy” types of questioners were much tougher.

Blair probably lost ten pounds doing this interview. What a workout. But, God bless him, he had his facts and arguments under control and put in a terrific performance. No wonder he is PM. I wonder if he changed anyone’s mind with it?

I have a lot respect for the British system, and the toughness and verbal facility and quick-wittedness of the British politicians who can handle this type of thing. Whenever I watch the questions in parliament, I think that most of our stuffed-shirts couldn’t handle it. Of the Presidents we’ve had in my lifetime, I think only Clinton (whom I detest) could probably have done OK, and also maybe Nixon. Those were both extremely smart and Clinton was good on the fly, and Nixon was always well-prepared. Either of the George Bushes, Reagan, Carter — no way.

The basic tone of the show and the questioners highlights the extent to which the USA is out of step with other countries, even the relatively friendly British. One guy actually said Powell’s presentation was “laughable”, and he was serious. Another guy asked Blair if the United States was going to be subject to disarmament by the U.N., and while he was being flip, he genuinely believed the U.S. is a more dangerous country than Iraq. The crowd seemed in basic agreement with these sentiments. The contempt for America and in particular for Bush is noteworthy, and jumps out at the American viewer. It is just assumed, obvious, a given, that the United States is a moronic country led by a moronic president. It is a good thing more Americans don’t realize how despised we are even in Merrie Olde England. The response would be to reciprocate, and that would not be productive. It’s a pity these people feel as they do, but ultimately not worth worrying about when our security is at stake. If a bunch of people in the North of England don’t like us, they’ll just have to lump us. And if they don’t want to go to war with Saddam, they are out of luck with Blair at the helm.

Blair has political courage to stick with the US on this. It would have been easier for him to bail out earlier, or never go down this road at all. Then the USA would have gone in alone, anyway, but Blair would probably have been more popular at home. He must actually believe it’s the right thing to do. He certainly projected that in the interview. He is a remarkable guy. He has an enormous amount of good will here in the U.S., whatever happens to him politically in Britain. Maybe Clinton can move to Britain and Blair can move to the U.S. Bottom line, if the war goes well, Blair will benefit politically, though to what degree I’m not sure. I think people may be resentful even if we win handily. Less uncertain is that if the war goes badly, Blair is finished. It’s a bet the ranch approach he’s taken. I suppose Gordon Brown would take over then. The Tories are a nullity at the moment.

Besides an apparent sincere belief in the rightness of this course, there is clearly another factor at work. Blair has extraordinary access to Bush and has been privy to the war planning at the highest levels from the beginning. No doubt he has been shown in complete detail what the war plans are, since Britain is making a very major contribution. I, like many people, am hoping the war will be a swift, crushing blitzkrieg. I have lots of reason to think this will be the way the war will actually go. That Blair is so confident gives me confidence.

We shall all know soon how well- or ill-founded Blair’s confidence is.