…almost nobody is willing to break out the champagne on these estimates. The Keynesians think our shrinking deficit is a sign of the White House’s foolish surrender to austerity at a time when the economy still needs more government spending, not less, to achieve real lift-off. The deficit hawks think a dropping deficit will only encourage Washington’s fatal short-term thinking, by persuading policymakers to ignore the still-yawning gap between our long-term commitments and our revenues. Conservatives don’t like the extent to which we’re taxing our way to temporary fiscal stability (some of the unexpected deficit reduction reflected high-income tax filers paying extra for 2012 to avoid higher rates for 2013), while liberals have reason to fret that the White House’s “fiscal cliff” strategy squandered an important opportunity to raise upper-income taxes even more. And anyone who worries about the American political system’s ability to do structural reform can’t be that encouraged by the path we’ve taken to this point – the crude cuts to discretionary spending that leave entitlements untouched, the higher marginal tax rates rather than a rate-lowering, deduction-capping tax reform, and of course the general inability to compromise in the absence of artificial deadlines and self-created crises.
I don’t drink champagne but I’ll break out the dark chocolate instead. One way to put it is that “yapping” — on all sides of the political spectrum — is overrated, most of all by the yappers themselves.
A slightly different take would be this. Voters are getting more or less what they want, which is some spending restraint, mostly holding the line on taxes, not too much trust in government as a way of moving forward, and a love of entitlements. One can find that objectionable, and indeed I do across a number of fronts, but there you go. We are not going to elect a new people anytime soon, and in this odd sense you can see all the recent political gridlock as reasonably democratic, more so than its critics would like to admit (I know I’ll generate a bunch of criticisms citing poll data about how Americans really want this, that, or the other but I’ll hold my ground on this one). Relative to the quality of the preference inputs, we are getting a better outcome than one might otherwise have expected. After all, isn’t that what this country is really all about? We may not have the world’s best farinata, but let’s raise a toast to America once again.