Monday, March 18, 2013

"Charts: Is the big US budget problem entitlement spending or ..."

You know how it goes. One thing on the internet leads to another.

I'm looking for something that grabs my attention. Google turns up a title that grabs. I borrow the title and click the link.

James Pethokoukis at AEI, Charts: Is the big US budget problem entitlement spending or defense spending?. This chart was good:

After the charts there are a few comments. Here's the first part of the first one. The comment is from Jon Murphy:

Let’s talk about what’s going on here.

Fact: the US government has a spending problem.

Fact: The US government has a budget deficit of approximately $1T.

Fact: CBO, OMB, and the Obama Administration all have projections that the debt will only get worse.

Fact: Something has to be done about spending.

So, let’s talk about spending.

What's wrong with Jon Murphy's analysis? Everything. For starters, he starts with a conclusion: "the US government has a spending problem." How does he know that? I don't know that.

The balance of Jon's post identifies components of the problem spending: entitlements, interest, corporate welfare, military spending.

His conclusion: "The US has a spending problem. This much is crystal clear."

You can't start with conclusions, and make good sense of things.

You can't start with an economy that has gone to shit, and understand how it got there.

You have to start with no assumptions about where the problem lies, and you have to look at the economy beginning in a time when the economy was good. And you have to watch things change for half a century or more. And that'll give you a feel for where the problem lies.

You don't start (and end) with "the US government has a spending problem."

Jon is right about one thing: He writes, "Interest will also be a problem going forward, but that can be curbed by dealing with the debt." Yes, but Jon is probably thinking of the Federal debt, which is the small part of the debt problem. And interest? Interest is the small part of the cost of debt.

And the cost of debt? That *IS* the debt problem.

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