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Rhinoceros

August 22nd, 2002

Mickey Kaus demonstrates that he has indeed turned into a rhinoceros (that is, a neoconservative) in his discussion of the ballooning budget deficit in the US. Every serious analyst now accepts that the US is going to remain in deficit forever under current policies. So the question is “Who lost the surplus?”
The obvious answer is Bush, by pushing through unaffordable tax cuts costing trillions of dollars> But Kaus echoes the Republican party line, saying (with marginal qualifications) that the problem is “runaway spending”. It turns out that, in Kaus terms “runaway spending” means spending growing in line with GDP. This is of course, the same definition that the Republicans have imposed on the Office of Management and Budget (OMB), but that doesn’t make it any more sensible.
As Brad DeLong observes, if the volume of services required grows in line with population and the main cost (wages) grows in line with income per head, spending has to grow in line with GDP just to maintain existing services. You can deduct a bit for productivity growth, but it’s hard to get a lot of productivity growth in, say, police services or schoolteaching.
A simple look at history suggests that public expenditure has hardly ever declined significantly relative to GDP even under governments like Thatcher’s that have been willing to run down the quality of public services in important areas. So in Kaus’ terms “runaway” growth is almost inevitable.

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