David Stockman Hawkish on the US Federal Budget
David Stockman was on Bloomberg yesterday reviewing the Obama 2011 Budget proposal. His view dovetails with the view on the budget I presented yesterday, when I said:
The key, however, is that no one actually wants to cut the items in the budget which account for the lion’s share of spending: defense, Social Security, and Medicare. Now, if the President were a lame duck or if this were the first Congressional term in his tenure, he could take these issues on. But, cutting any of these areas is not likely to win voters. So, the President is forced to cut more deeply into non-military discretionary spending in order to position himself as fiscally responsible.
In the video below, Stockman accuses both the Obama Administration and the Republicans of ducking these central fiscal issues and advocates cutting spending and raising taxes (as they have done in the UK). That’s a recipe for disaster in my view. See my comments from the last Stockman video I showed in September.
Question: isn’t it true that cutting military spending, fixing healthcare costs, means testing Social Security and raising retirement ages as Stockman suggests would eliminate the longer-term structural issues? Why then would one need to cut cyclically-induced deficit spending in that case? That makes no sense to me. Again, if the economy were operating at full employment and the government instituted Stockman’s recommendations on military, Social Security, and Medicare, there would be no deficit.