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View Diary: Treasury Secretary Jack Lew advises Europe to ease off austerity. Perhaps he should talk to his boss (74 comments)

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    PhillyJeff

    the analogy to European austerity is probably the sequestration, to which the chained-CPI (soon to be) proposal is an alternative, and that's a circumstance arising from two consecutive Republican wins in the House of Representatives, the organ most responsible for setting fiscal policy.

    The full budget is officially announced on Wed., the actual terms of which should alleviate some of the more hyperbolic fears when we see what is and what is not included and what mitigating measures there are.  (Claims that Chained-CPI "targets" the existing elderly and disabled are likely to be proven wrong, which is not the same thing as meaning the proposal is actually good.)  To compare with austerity measures, however, you'd want to look to the amount of money being taken out of the economy, and from that perspective, Chained CPI represents a very small macroeconomic provision of the budget -- which arguably makes it the most easy thing to negotiate out (because why not), though likely at the price of shorter-term cuts and continuation of unjust and distorted loopholes, sequestration cuts, and  those areas in Obama's proposals seeing short term spending increases.  

    The most interesting argument about Chained CPI is that CPI-Elderly would be a better measurement still because of rising health costs -- but what if as a very result of the budget y'all are dismissing without having seen, that were not as much the case.

    So, the argument this represents "embrace of an economic theory" is not supported by the claim in two different ways -- first, this is largely a political move, brought about because Republicans are better at sticking to their guns on taxes (and also literally sticking to guns).  Secondly, because it's a category mistake.  It also misstates the ostensible purpose of austerity, which to be clear did not work, but was not formally supposed to be trickle down.  It emerged out of sovereign debt panics with countries that are unable to increase their monetary base.  (Britain's Tory government, by contrast, used this as a cover; though the pound had its own problems given the state of British banks.)  The fact that such cuts make it harder, not easier to finance debt obligations only matters to the extent the market realizes that, and that's where Lew's coming in.  It's not synonymous with trickle down, and neither applies to Obama's budget ideas, which again, would need to have something else in substitute (and which hasn't even been formally introduced).  

    Indeed, the best argument that Obama's not seeing the deficit itself as an immediate problem is the very structure of a proposal that gradually phases in cuts and tries to avoid them as much as possible as the recovery continues in a tentative fashion.  An argument that someone else's ox should get gored is probably valid, but it's not that abstract of one.  It's a legitimate argument that we should keep on the current path instead, on the basis that the effect of $130B in even modified or mitigated sequestration cuts imposes so much disproportional harm as to outweigh any other benefits in the budget, but it should be that specific, and the alternative is not a fortiori austerity.

    Difficult, difficult, lemon difficult.

    by Loge on Mon Apr 08, 2013 at 01:44:37 PM PDT

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