Samuelson on Obama's budget

The mainstream media is picking up on the dangerousness of the debt situation. Robert Samuelson in WaPo:

When historians recount the momentous events of recent weeks, they will note a curious coincidence. On March 15, Moody's Investors Service -- the bond rating agency -- published a paper warning that the exploding U.S. government debt could cause a downgrade of Treasury bonds. Just six days later, the House of Representatives passed President Obama's health-care legislation costing $900 billion or so over a decade and worsening an already-bleak budget outlook.

Should the United States someday suffer a budget crisis, it will be hard not to conclude that Obama and his allies sowed the seeds, because they ignored conspicuous warnings. A further irony will not escape historians. For two years, Obama and members of Congress have angrily blamed the shortsightedness and selfishness of bankers and rating agencies for causing the recent financial crisis. The president and his supporters, historians will note, were equally shortsighted and self-centered -- though their quest was for political glory, not financial gain.

Let's be clear. A "budget crisis" is not some minor accounting exercise. It's a wrenching political, social and economic upheaval. Large deficits and rising debt -- the accumulation of past deficits -- spook investors, leading to higher interest rates on government loans. The higher rates expand the budget deficit and further unnerve investors. To reverse this calamitous cycle, the government has to cut spending deeply or raise taxes sharply. Lower spending and higher taxes in turn depress the economy and lead to higher unemployment. Not pretty.

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We're all Keynesians now?

Lower spending and higher taxes in turn depress the economy and lead to higher unemployment.

Agree/disagree?

....health-care legislation costing $900 billion or so over a decade and worsening an already-bleak budget outlook.

No question, the federal budget is unsustainable. But it’s been unsustainable throughout my adult life. It’s unclear to me whether the health care bill helps or hurts that situation.

Assuming it does increase the deficit – why does it? Specifically, does the health care bill shift existing health care costs from private parties to the public (a pure wealth transfer), without inducing any change in health care consumption? Or does the health care bill increase health costs by inducing changes in behavior – that is, enabling more people who need health care to obtain it? I’m not sure I’ve seen a functional analysis forecasting changes in expenditures, revenues and health outcomes relative to the status quo.