Comments on A Big Steaming Pile of Hypocrisy

One of my readers commented on my post on Keith Olbermann. There are two points here. First, is the media treating the Obama plans with the same level of scrutiny that they treated the Bush plans with? From my perspective I think they are not. Bush was roundly criticized for allowing the deficit to grow to 5% of GDP. Obama, has allowed it to more than double that rate - even accounting for the decline in the economy.

At the end of Bush's term the economy had been in recession, according to the National Bureau of Economic Research (the official arbiter of such things) for about a year. He allowed the deficit to grow to 5% of GDP. Olbermann was highly critical of that development. Over the last decade federal revenues as a percentage of GDP have fluctuated at levels between 18% and 20% of GDP, as a result of the recession which Obama inherited that level has dropped to 15% of GDP. But even with that, according to the Congressional Budget Office, the deficit balloons to 13% of GDP - that is twice the level under Bush and Olbermann and other Bush critics are silent on the change. In my book that is hypocrisy.

The second question is the more important. Are the Obama policies going to be helpful in abating the effects of the recession? In this case there are two issues here. Will the cure help? And I am skeptical that it will. Second, will the cure induce significant inflation? I believe there is a considerable risk that the significant increase in borrowing, under both Bush and Obama will have huge long term negative effects on the economy including the possibility for significant inflation similar to the kinds we had in the middle 1970s under President Carter. As Robert Samuelson pointed out in his recent book The Great Inflation and Its Aftermath the policy levers that were used in the early 1980s may not be as available or effective in this cycle. Note: there is considerable debate about whether the inflationary cycle that I worry about will come about. But I believe the current administration (and the last one) has paid inadequate attention to the issue.