What a difference a year makes. Last January, discussions of tax cuts used the mantra, "Timely, Targeted, and Temporary," to describe what the federal government should do with a stimulus package. I thought it was an unfortunate tactic, and I'd be more angry about it now if the $150 billion tax cut package it precipitated hadn't been followed up by even more ridiculous fiscal policy later in the year.
The constructive idea in the op-ed is to consider the backlog of public infrastructure projects needing attention, prioritize them, schedule them in over a multiyear horizon, include their costs in budget projections, and then move them forward in time if the economy weakens and prices go down to make them cheaper to do sooner rather than later.<!--break-->
We would be in better shape today if we had started this a year ago, as more solid projects would now meet the threshold of "shovel-ready." Our policy would not look like we were playing whack-a-mole with a sledgehammer full of government debt as each new financial or economic contraction appeared.
I was not alone in trying to articulate a better way to conduct fiscal policy. In his comments on the FY 09 budget, Brad DeLong wrote:
We want to run a budget that is in surplus during boom, in deficit during recession, that borrows in order to fund investments that benefit the future, and that runs surpluses and pays down debt in order to fund future expenditures that benefit today's taxpayers. The Bushies have not done that.
A year later, what concerns me is that we are still not doing that, and the mess that Obama confronts on his first day in office makes it less likely. I have given my own standard for budget policy in a number of places (like here) that doesn't differ in spirit from Brad's. I am looking for long-term entitlements in projected balance and the non-entitement spending to match non-entitlement revenue over a business cycle.
Based on our experience in the 1990s and this decade so far, the biggest impediment to running a sound budget policy is the presence of elected officials in both the legislative and executive branches of government that push tax cuts as the policy for every situation.
That characterizes the policies of the Bush Administration during its eight years and the views of many of the Republicans that remain in Congress today. Unless they can articulate a sensible budget target for the long term, there is no economic reason for the Democratic majority in Congress or the Obama Administration to appease them on their short-term demands for yet more tax cuts.
Once they've taken ownership of the process, my hope is that Obama's economic team (some of whom are part of the Timely, Temporary, and Targeted crew) will recognize the need to plan before they spend and that an economic downturn raises, not lowers, the need to be careful with federal monies.