David Stockman's analysis offers no solutions to budget deficits. The key is finding sound rules for policymakers.
Read David Stockman's tirade about the 30-year fiscal war. Stockman says the U.S. is "hurtling irreversibly toward a budgetary crack-up...." Published in Politico, it nails everyone. This would be great fodder for any classes that covers public finance.
My only quibble is that Stockman doesn't offer solutions. By that I mean he's like a doctor who diagnoses obseity and declares with an ominous scowl, "Be less obese."
Of course! Our government spends more than it taxes, and the gap has been accelerating. But the policy solutions (spend less, tax more) are NOT THE POINT. The point is that the rules that govern fiscal policy-making are broken. If you did not get that message from Evan Bayh's retirement, then you are missing the forest for the trees.
The only discussion worth having now is: What new rules will restore sound policymaking? There are two tests for rules. One, will the rule work and work robustly over time? Two, can the U.S. enact the rule?
The dilemma is that potential rules may never be able to pass both tests. As an example, President Obama's "bipartisan fiscal commission" has already passed the first test, but there is a great deal of skepticism if it can pass the second test. Pay-go is another example. Works for a while, but it has always proved non-robust. Alternatively, rule that would completely satisfy the first test are budgetary Amendments to the Constitution, but again political reality seems to make enactment of these near impossible.
What rules would you like to see?
Let's hope (and suggest) that the President's new commission includes a careful set of recommendations on rules, in addition to the policy options. We've been talking policy options for 30 years, with lone economists like Stockman screaming into the wind, and I don't think that conversation is working.
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