Budget Wars

President Obama rolled out his long-awaited budget today and had both the left and right upset . . . maybe that’s a good thing.  Regardless we have a long way to go, but in this discussion there’s a lesson why government doesn’t run like a business.

The “big picture” economists in Washington like to talk about debt in relation to GDP and don’t want to get mired into the detail of how money is spent or collected.  It’s all good as long as you get what you want and the deficit falls within a certain range (about 3% of GDP) and growth in the economy is occurring.  Where’s that number right now?  It’s projected to be about 5.3% in 2013 — and Obama’s plan would bring it down to 4.4% in 2014. And if there’s good economic growth, that number drops dramatically.  And here lies the reason why the deficit doesn’t bother a lot of folks in D.C.

It’s all about the top line, and since we’re only talking about a few percentage points, it’s no big thang.  And we don’t need to discuss the TOTAL amount of debt (which as a percentage of GDP is only second to the amount of debt we incurred in WWII) or how we are going to bring that back down to historic levels.   Because once we get everything headed in the right direction, our economy will grow and the numbers will take care of themselves.

So, if we are a decision maker in Washington, all we have to do is find a way to grow the economy.  We can then spend like drunken sailors and get re-elected, and life is good.


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