Monday, October 16, 2006

So what's the top issue in the election? 

Last night I heard it was Iraq and the courts. Yet a survey in National Journal (reported by MSNBC) says it's the economy, still. A panel of 11 economists (NJ calls them non-aligned, and while they look more Keynesian than the profession as a whole, I think non-partisan would be fair) gives these grades (and there's no grade inflation here):
Short-Term Fiscal Policy: B-
Long-Term Fiscal Policy: D
Long-Term Growth And Competitiveness: C
International Economic Policy: C
Regulation: B-
Leadership: C
Comparison With Past Congresses: C
Hard to quarrel with those grades. If C is average, the only place where the Republicans have done worse than average is on long-term fiscal policy (and very little has been better than average). The problem according to this group of 11 was that the long-range plans for Social Security and Medicare are out of alignment with the long-term fiscal balance. I find it interesting that the failure to act on Social Security last year has not been a more significant feature of this election. Instead the battle has been over tax cuts. If the grades are accurate, then you can see why the debate really hasn't been over the economy.

After posting a story on Thursday, Gary Gross wrote me to ask how much lower the deficit can go. The answer to this is, quite a bit, if that's what you really care about. I don't. Here's the chart I care about.

This is a graph from about the beginning of the Bush administration of what happens in the long-run with revenues and outlays at the Federal level. This was what was expected to happen -- there was an avalanche of Social Security outlays coming at some point, which someone will have to deal with soon. These continue to be ignored, papered over, or -- my preferred hypothesis -- warred over between the two parties, each hoping to impose the costs of closing the gap post-2020 on the constituents of the other. Nothing is happening with this. The current Democrat strategy is to point to that bulge in 2000-2010 and say the Republicans have squandered that. They may have a point, but that problem is nothing compared to the demographic shift that is coming with the aging baby boom. And we are now on our third election where the only person to talk about it -- Bush, in 2004 -- has not only lost the debate to do something but now is cowed from saying anything about fixing it.

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