Glenn Reynolds and Don Surber are still pretending to believe that the federal deficit isn’t a real problem. This time they’re trumpeting the unsurprising fact that the Treasury took in more than it spent in January. Of course, the Treasury usually runs a surplus in January, because that’s when the estimated tax payments come in. (The story that they both link to, and which Surber quotes in relevant part, makes that clear.)
So far, no takers on my offer to bet up to $10,000, giving 2-to-1 odds, against a Federal fiscal surplus in this fiscal year (ending in September), the next one, or the one after that. So if I’m wrongly charging Reynolds and/or Surber with pretending to more ignorance of these matters than they actually possess, then I’ll be happy to apologize (and take their money).
I’m disappointed that Steve Conover, one of the ur-sources of this drivel, doesn’t actually believe it either. I thought I’d stumbled onto some easy money when he offered to take a part of the bet, but he quickly backed off. First, he insisted on terms under which he would win if the budget came into surplus, not for any one of those fiscal years, but for any twelve-month period. I pointed out that one twelve-month period out of deficit isn’t the same as having solved the deficit problem, any more than one day sober is the same as having recovered from alcoholism. But since it’s not going to happen anyway, that part of the Conover’s weaseling didn’t really matter.
But then came the kicker: he insisted on a clause that would void the bet if Congress raised or lowered any income-tax rate between now and January, 2010. Since some tax-rate changes are almost certain as part of the fix to the creep in Alternative Minimum Tax brackets, Conover’s version of the bet isn’t much more meaningful than betting that the Red Sox will win the World Series: unless it snows in Boston sometime this winter.
So we have a bet down, but no one is likely to collect. And, as I say, so far neither Conover nor anyone else has been prepared to put actual money down on the original proposition: that the deficit problem is going away, and the Federal government coming into fiscal balance, without any need to raise taxes or cut spending.
To be fair to Conover — and when have I ever been less than fair? — he has the quite reasonable belief that there’s no reason, in principle, to regard the national debt as a big problem as long is it doesn’t grow too big, measured as a proportion of our Gross Domestic Product. On that we agree.
I think the current deficit is a problem because it means that, in fiscal terms, the Federal government isn’t saving up for the day when, the Boomers having mostly retired, payroll taxes don’t cover Social Security disbursements, and the General Fund has to start paying back some of the IOU’s it’s been writing to the Social Security Trust Fund. Secondarily, it’s a problem because, along with net private dissaving, it means that the nation as a whole is spending more than it produces, which isn’t indefinitely sustainable.
That’s on the fiscal-policy side of things.
The other reason to pay attention to the deficit is political (by which I don’t in this context mean “partisan”) rather than economic. The opportunity cost of public expenditure is the value that could otherwise have been derived from the resources that expenditure represents. We shouldn’t spend a public dollar that doesn’t do more good in the world than it would do if left in private hands (with an extra allowance for the overburden of taxation due to the costs of collection and the distortion of economic activity due to tax avoidance).
Some sort of deficit target, or the equivalent in PAY-GO rules, is the only way to keep the Congress and the Executive, especially if they’re both dominated by scoundrels from the same party, from spending money as if it grew on trees. (The Iraq War was popular, for a while, partly because no one saw his take-home pay shrink to cover its costs.)
But that’s all in the realm of analysis. In the realm of brute fact, the Federal budget has been, is, and will be in deficit. If you want to argue against the proposition that the deficit is a problem, fine. But if you want to argue against the proposition that the deficit is a fact, put your money on the table.