The Budget Through a Realistic Lens
If the publishing system allowed, I'd type those words in squiggly lines for full effect. Whether one is talking to a Ouija board, a Magic 8-Ball, an economist or the president of the United States, the answer is the same. Nobody knows.
And the question is: Will the U.S. economy bounce back after trillions in rescue, recovery and spending?
It's all a gamble. The Republican attempts to "starve the beast" -- slash taxes and force government spending cuts -- didn't work because spending never got cut. So now, apparently, we're going to feed the beast.
As we cross our fingers (and our toes), our minds warp at the concept of trillions. What is a trillion, anyway?
Chris Martenson's online "Crash Course" in economics explains a trillion this way: First, picture a million dollars as a four-inch stack of thousand-dollar bills. A comparable billion-dollar stack is 358 feet tall. A trillion-dollar stack of thousand-dollar bills stands 67.9 miles high.
So, yes, that tightening you feel in your gut is a perfectly rational response. Trillions in government spending, while raising taxes on those who do the most to drive the economy (hiring and investing in risky markets, for instance), is a frightening proposition. Or is it?
That question led me to sit down with Matt Miller, one of the saner voices amid the cacophony. Miller, who so strongly resembles Tom Hanks that you want to ask him about "Wilson," isn't a shouter. A former Clinton budget aide and author of "The Tyranny of Dead Ideas," he finds the hysteria over Obama's proposed budget misplaced.
Upfront, he says that Obama isn't coming completely clean on taxes. Everybody, not just the richest, will have to pay more taxes in Obama's second term (assumptions pending), owing to the strain that retiring baby boomers will put on Social Security and Medicare. Miller figures that Obama is hoping that by then, enough people will be pleased with the government his administration has put in place that they won't mind paying for it.
In the meantime, Miller says that the key to assessing whether the budget is terrifying or reasonable under the circumstances is by examining spending, taxes and deficits as a percentage of gross domestic product.
Spending as a share of GDP in 2009 will increase from 21 percent last year to 27.7 percent, which Miller concedes is "scary." But the 10-year spending average under Obama's plan (assuming reasonable recovery) will be about 22 percent of GDP -- the same as under President Ronald Reagan.
Tax rates, which will return to Clinton levels in 2011, also shouldn't be alarming, says Miller.