The "You Can't Seriously Be This Stupid" Game

Thanks again to Greg Mankiw for providing me a route to Keith Hennessey's further annihilation of anything resembling sanity. I'm starting to wonder about Mankiw as well... Anyway, the link above is Hennessey's take on Obama's recent Reagan-esq tactic of blaming the previous administration for our current economic situation. I just learned of Keith Hennessey a few days ago, so I really didn't know if he had any significant agenda. Now I know, and I must say, above and beyond most others I've read, he seems particularly misguided. Warning: this might be an extremely long post...

From Hennessey:

"Argument (Obama): The previous administration and previous Congresses created an expensive new drug program (Medicare)… without paying for any of it.

Response: This Medicare drug program is ongoing. If the President thinks it is too expensive, then he should propose to make it less expensive. If instead he thinks it should be paid for, then he should propose other spending cuts or tax increases to offset the future costs." . . . etc.

My response: The administration has made proposals to limit the costs of medicare long term. But Hennessey and others in the republican party have spun what would be a fiscally responsible policy as, "destroying medicare," and "pulling the tube on grandma." There are proposals on the table right now, from republican members of the budget committee, that would serve to limit future costs of Medicare. From the GOP Issues Conference:

"--THE PRESIDENT: . . .I want to make sure that I'm not being unfair to your proposal, but I just want to point out that I've read it. And the basic idea would be that at some point we hold Medicare cost per recipient constant as a way of making sure that that doesn't go way out of whack, and I'm sure there are some details that

--CONGRESSMAN RYAN (speaking to The President): We drew it as a blend of inflation and health inflation, the point of our plan is -- because Medicare, as you know, is a $38 trillion unfunded liability -- it has to be reform for younger generations because it won't exist because it's going bankrupt. . ."

--THE PRESIDENT: When we made a very modest proposal as part of our package, our health care reform package, to eliminate the subsidies going to insurance companies for Medicare Advantage, we were attacked across the board, by many on your aisle, for slashing Medicare. You remember?"

So here you have The President and Republican Congressman Ryan (on the budget committee) speaking together in a civil manner about reforming medicare, cutting costs, or "pulling the tube on grandma," if you will. There are three main things to take away here. 1. $38 trillion dollar unfunded liability. This is totally unsustainable going forward 2. Republicans acknowledge the need for reform proposals, as projected deficit growth is unsustainable. 3. The republican party simultaneously recognizes the need for reform, and then calls out the democratic party for proposals that they help develop. This is a problem, and it's happening because of people like Keith Hennessey.

From Hennessey:

"Argument (Obama): The previous Administration and Congresses funded two wars without paying for it.

• Response 1: The Obama Administration is continuing these wars without paying for them, and expanding forces in Afghanistan without paying for that.

These are unsubstantiated claims. The Obama administration is currently scaling back operations in Iraq. Further, future war operations will be paid for in the form of higher taxes when the Bush tax cuts expire. The Iraq war, again, was total fallacy from the beginning. There is no connection between Osama Bin Laden and Saddam Hussein, and there were never any weapons of mass destruction. The giant gap created in the Budget was due to Bush policies, waging wars, and lowering taxes. Again, Hennessey is deliberately misguiding the public.

From Hennessey:

"Argument (Obama): The previous Administration cut taxes for the wealthy without paying for it.

Response: Our medium-term and long-term deficit problems are driven by the growth of entitlement spending: Social Security, Medicare, and Medicaid. Raising taxes will not slow this spending, it will just buy us a few years of delay and slow economic growth."

Fair point, sort of. Our long term debt problems lay in entitlement spending. Raising taxes will not lower spending. Raising taxes will likely only lead to more spending and bigger government, (a debate for another time.) I guess I just have a problem with what Keith is saying, and what his party has been doing. I commented above on how democratic and republican leadership both recognize the need for entitlement spending reform, i.e. health care reform. I just know that as soon as a policy is proposed, one that might really control medicare costs, you'll see immense republican opposition.

From Hennessey:

"Argument (Obama): The Bush policies caused a $200 B annual surplus and “projected surpluses stretching out toward the horizon” to turn into deficits.

Response: This argument always relies on one specific forecast which later turned out to be inaccurate. In January 2001 CBO projected a 2002 surplus of $313 B. One year later they projected a 2002 deficit of $21 B. Of the $334 B decline, CBO said 73% was from “economic and technical changes” beyond President Bush’s control. The other 27% was the result of legislation."

What is he saying here exactly? That somehow $230 billion dollars of the 2001 budget deficit wasn't due to George Bush? Fine Keith, I'll give you that $230 billion. But Hennessey doesn't mention the fact that "economic and technical changes" were favorable in terms of the budget from 2002 to 2007. Somehow during that period the budget deficit skyrocketed, despite what Hennessey seems to declare is sound fiscal policy. I don't see how you can downplay the Bush administration arriving with a $200 billion dollar surplus, and leaving 8 years later, with a $1.3 trillion dollar deficit. You can manipulate the numbers all you want. You can say that the Congressional Budget Office, (an independent, bipartisan body) was somehow wrong, or somehow trying to make democrats look better. But you can't fake a $1.5 trillion swing in 8 years. There's no way to manipulate the bottom line here.

From Hennessey:

"Argument: When President Obama took office, he faced projected deficits of $8 trillion over the next decade.

Response: There is no delicate way for me to say this. The $8 trillion number is made up. In January 2009 CBO projected deficits for the next decade of $3.1 trillion. The President’s first budget played games by redefining the baseline to make the starting point look as bad as possible so that Team Obama could claim their policies would reduce the deficit. Don’t get me wrong — $3.1 trillion of projected deficits is still a huge bad number. At the same time, $4.9 trillion is a lot of gaming."

So now he results to conspiracy theories? That somehow an independent office, the CBO, manipulated things to work in Obama's favor? $8 trillion is "made up." This is completely ludicrous. The CBO doesn't have an incentive to do the Obama administration any favors.

Hennessey's "analysis," of The President's statement is completely ridiculous. Over and over again he stretches truths and carefully manipulates the facts to work in his favor. If one reads his entire piece one gets the impression that he advocates lower taxes and a shrinking deficit. I'm sorry to bring him into the real world, but it doesn't work that way. He hints at wanting to make changes to entitlement spending, by bringing up medicaid and medicare, but completely disregards the fact that controlling costs for such programs is politically unfeasible in the current environment. The democrats have tried, and were turned away by a radical and ignorant republican base. I'm not trying to say anything about republican politicians in general. I understand that they too hope for progress on such issues. But when pundits like Hennessey and others continually lie to the base, they back themselves into a corner politically, where it makes progress very difficult.