Bloomberg on the Federal Budget

http://www.futureofcapitalism.com/2012/03/bloomberg-on-the-federal-budget

Mayor Bloomberg has an op-ed piece in the Wall Street Journal about the federal budget. It manages to be both wonderful and wrong at the same time. First, the wonderful part:

The president not only embraced the frustration expressed by Occupy Wall Street protesters—which was real—but he adopted their economic populism.

Central to fixing the country's problems, he has argued, is making the wealthiest Americans pay their "fair share," even though the top 5% already pay 59% of all federal income taxes, while 42% of filers have no federal income tax bill at all (or got a check from the government via the earned-income tax credit). Warren Buffett's secretary became the public symbol of this strategy, even appearing at the president's State of the Union address. (Mr. Buffett, of course, did exactly what lower capital gains taxes are designed to encourage: He invested!)

I don't believe in class warfare...We are all in this together. Pitting one group against another not only divides us in counterproductive ways but offers one group the false promise of something for nothing.

Then, the wrong part:

the federal government was running up huge deficits during a period of economic growth and telling the American people not to worry about the bill...If the federal government passed a real deficit-reduction plan, business leaders would respond as they did in the 1990s, when President Clinton and Congress adopted a long-term deficit-reduction plan that gave businesses more certainty about the market. A serious deficit-reduction plan that both increases revenues and reduces expenditures would be the most effective economic stimulus plan Washington could adopt.

It's an overstatement for Mr. Bloomberg to say that "the federal government was running up huge deficits during a period of economic growth." Two New York Sun editorials, Incredible Shrinking Deficit and Incredible Shrinking Deficit, II tell the story. Here, from the second of those editorials, were the Congressional Budget Office's deficit numbers in mid-2007:

2004: $413 billion
2005: $318 billion
2006: $248 billion
2007: $158 billion

And as a percentage of GDP:

2004: 3.6%
2005: 2.6%
2006: 1.9%
2007: 1.2%

And remember, these weren't only periods of economic growth, they were also wartime; it wasn't just tax cuts that ran up those deficits, it was all that extra September 11 rebuilding aid and homeland security funding for places like New York City that Mayor Bloomberg was shuttling to Washington at the time to ask for and happily spending once he got. I don't recall a lot of whinging from him at the time about the federal deficit. As for the belief that the economy will respond to deficit reduction, it depends what's in the plan. One that emphasizes increases in marginal tax rates won't do much, as George H.W. Bush and first-term Bill Clinton found. One that includes spending restraint and rate reductions that yield increased tax revenue (like the second-term Clinton capital gains tax cut, or the tariff reductions of NAFTA), will boost the economy.

I'm not quite sure how this piece, which is pretty critical of President Obama, fits with Mr. Bloomberg's vice presidential campaign, but then again, it also is pretty critical of the Republicans.

by Editor  |  Mar 29, 2012 at 9:58 am Related Topics:  New York, Politics, Taxes, Warren Buffett receive the latest by email: subscribe to the free futureofcapitalism.com mailing list