Monday, November 26, 2012

"Death Panel" Advocate Rattner's Math


Democrat fixer Steven Rattner is out with another NYT op-ed that is getting some attention today.

Remember this is the same guy who previously authored a disgraceful NYT op-ed that advocated for "Death Panels" in health care policy which in contrast made the Randian and former VP candidate Paul Ryan seem almost empathetic.

And now it seems he is weighing in on fiscal policy.  Rattner:
Here’s the math: We need at least $4 trillion of long-term deficit reduction, with a substantial portion — on the order of $1.2 trillion — coming from new revenues.
This is a textbook example of how math can be misapplied and misused by morons.  The key with mathematics is knowing how to correctly apply it;  which Rattner here exhibits no capability thereof.

Here is the REAL math:  The fiscal deficit is simply the ex-post accounting record of the non-government sector's previous period $NFA savings desires.

As an ex-post accounting record, the "deficit" cannot be looked at as a "tool" that policymakers can "use" via positive actions in an effort to influence future economic outcomes. The deficit can only be looked at ex-post of the previous REAL economic outcomes, and a rising deficit is an ex-post indicator of poor REAL economic outcomes in the previous accounting period.  It is a rear view mirror.

To the extent that Rattner is revealing the Democrat position going into the current political negotiations we can see here that the Dems are thinking approximately $1T of tax increases and $3T of spending cuts.

Looks like in the $1T of tax increases the Dems are going to target higher income level taxpayers so that part of their fiscal plans most likely won't effect the macro economy that much.  Taxpayers at the targeted income levels would probably just save much of those marginal $NFA anyway.

But the $3T in implied spending cuts is substantial and real.  This represents $300B per year over the 10 year period that the current political negotiations over fiscal policy are focused on; or about 2% of current GDP.

These $3T in proposed cuts are mathematically equivalent to a tax increase for the lower to middle class of $3T.  Because the recipients of most government spending are the citizens working in the areas of the economy that benefit most from discretionary government spending.

It takes true mathematical insight to understand that in the US today, a spending cut is equivalent to a tax increase.  A mathematical insight that is surely lacking among those currently working to influence economic policy in the US today.

4 comments:

jeg3 said...

Yup, and an incompetent Incompetent leadership also destroys what is needed for future progress. This is what really screws over future generations (not soc. sec./healthcare).

"US SCIENCE COULD FACE FISCAL CLIFF DOOM"
http://news.discovery.com/earth/science-funding-fiscal-cliff-economy-jobs-121125.html

Matt Franko said...

jeg3,

Good point, these scientists do well for themselves (tho not millionaires by any stretch) and most of the $NFA they get paid with come directly from govt discretionary spending programs...

Rattner is no scientist that is for sure! (moron)

rsp,

paul said...

There are honest scientists, and then there are those that go-along-to-get-along (sell-outs).

The voices of the honest ones (the vast majority) are obscured by the sell-outs.

Until we find a strategy to end this co-opting of reality it will be difficult to make progress.

PeterP said...

As paul and I noted on another thread, there is another NYT op-ed out today, by Krugman who basically completely endorses MMT teachings on deficits!

http://www.nytimes.com/2012/11/26/opinion/krugman-fighting-fiscal-phantoms.html?ref=opinion&_r=0