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Do you trust government’s projection 10 years out? February 5, 2010

Posted by hslu in Economics, Health Insurance, Politics.
Tags: , , , , , , ,

According to Krugman’s Op-Ed piece on New York Times today, short-term federal budget deficits are no big deal because the government is the only machine that can create jobs now. He said that we shouldn’t worry about the budget deficit for the next few years or even the next decade.

He cited government’s recent budget proposal which suggests that interest payments on federal debt is projected to be only 3.5% of the GDP 10 years out. His comment is : How scary is that? He added that: it’s about the same as interest costs under the first President Bush.

My questions to Krugman is this:

  • How good is federal government’s projection on economics 10 years away?
  • Why did you take that projection as a fact instead of questioning its validity?
  • When was the last time any projection by the federal government, or for that matter, any economist with or without a Noble Prize, worth the paper it was printed on?

He did concede that the long-term picture of the U.S. federal budget deficits is dire. He added that even a fully recovered US economy will not balance the federal budget, ever.

His remedies: increase revenue, control costs and doing something about the health care costs.

In case you are not familiar with the coded words, let me explain what those remedies mean:

  • Increase revenue – increase personal and corporate income taxes, increase payroll taxes and maybe a value-added tax later on.
  • Control costs – Delay social security benefits for everyone.
  • Doing something about health care costs – reduced benefits on Medicare and Medicaid.

I guess tax reduction is out of the window because Krugman conveniently ignored to mention the fact that the new $3.8 trillion BHO budget includes almost $1 trillion new taxes.And even with that new taxes, the deficits in 2011 is still more than $1 trillion dollars.


What about a smaller federal government?

Shall we ask for a across-the-board 10% salary cut for every federal employees retroactive to January 1, 2009? Many employees in the private sectors got 10% less in 2009?

Shall we ask for a across-the-board 5% head count reduction on every department of the federal government every year? After all, many private companies did so in 2009? We need to get rid of the dead woods in the federal government a long time ago.

If you don’t agree with me, just take a look of the US postal Office. Ask someone who still works there and see how they compare with FedEx or UPS even after recent re-organization.


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