There’s no point in writing up another article on Larry Kudlow’s recent analysis of Bush’s proposed budget, since my points would be the same as the last time I did it. As before, there is the trick of removing big-ticket items in order to make the rate of growth of everything else low:
Beyond this important threshold, Bush deserves credit for his toughest effort thus far to restrain federal spending. Overall discretionary spending is aimed at slightly less than the projected inflation rate. Excluding homeland security and defense, discretionary spending actually falls in inflation-adjusted terms. There are also some tentative efforts in the budget to reduce the growth rate of entitlement spending, especially Medicaid. And the administration is finally waging war on farm-sector welfare queens.
(Incidentally, this is just the proposed stuff. If the above were to actually happen, I agree it would be decent as far as politicians go. But does anyone really think farm subsidies will be slashed?)
Anyway, I wanted to share with you this gem, where Kudlow explains that deficit spending is actually “investment” in economic recovery. We’re all Keynesians now:
Deficit teeth-gnashing will go on forever. But there is no evidence that a temporary deficit increase to finance recovery investment has had any ill effect on the economy. Well-run businesses sometimes borrow to invest in future expansion. So must the federal government.
(Incidentally, in fairness to Kudlow he seems to be saying that the first Bush Administration allowed business to invest more when it refrained from higher taxes in order to balance the budget. But the reason there were huge budgets under Bush’s first administration was that spending went through the roof, so this explanation is silly.)
