Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Businessweek Archives

Unsolicited Political Advice

? More on Wealth, Trade and Productivity |


| Why GM is so oppressed by legacy costs ?

July 13, 2005

Unsolicited Political Advice

Michael Mandel

The Democrats need to stop running against the budget deficit. Here's why.

1)Running against the budget deficit hasn't worked. Since Walter Mondale in 1984, every Democratic presidential candidate except one has run against the budget deficit and lost. The one winner, Bill Clinton in 1992, ran a pro-investment campaign, and didn't switch to an anti-deficit economic policy until he was in office (Remember "Putting People First"? See here for a Clinton 1992 campaign brochure. )

2) The budget deficit is a squirrely target. The deficit is small relative to the size of the economy, so it can shrink unexpectedly (as it appears to be doing now).

3) In the short run, there is little direct connection between the size of the budget deficit, and the state of the economy--including the things that concern Democratic and independent voters, such as unemployment, interest rates, and inflation.

4) Focusing on fiscal rectitude makes it harder for Democratic politicians to push for the types of spending which might actually benefit the people who would vote for them.

5) In the medium term, even liberal economists can only find a minor effect of budget deficits on growth. The January 2004 Brookings report "Restoring Fiscal Sanity" estimated that a $5 trillion increase in national debt would cut a bit more than 1 percent off GDP by 2014. That would lower the ten-year growth rate by only a tenth of a percentage point--well within the rounding error for growth estimates.

6) If there's a long run deficit problem, it comes from the growth of health care spending and has very little to do with today's deficit.

7) Running against the deficit hasn't worked for 20 years. As the expression goes, insanity is doing the same thing over and over and expecting a different outcome.

Enough said for now.

08:40 AM

Political Economy

TrackBack URL for this entry:

Listed below are links to weblogs that reference Unsolicited Political Advice:

? Silly Liberals... from Positive Externality

I think Dr. Mandel might just be implying that Democrats are insane. On a more serious note, however, he makes a good public choice argument here without directly stating it. The budget deficit doesn't really effect people's lives. The budget defici... [Read More]

Tracked on July 13, 2005 02:59 PM

blog comments powered by Disqus