Kevin Hassett just finished up a conference call for the Republican National Committee. The subject: Obama's claim that the private sector is doing "fine." Hassett, an economist at the American Enterprise Institute and former adviser to John McCain, has a reputation as an honest, ideologically moderate conservative.
While researching an item from earlier this morning -- yes, I do research, I just try to avoid talking to people -- I came across a fascinating exchange about the concept of economic stimulus. In 2001, the economy was undergoing a mild slowdown. Liberals generally argued that the scale of the problem was small enough for the Federal Reserve to handle with monetary policy, and didn't require a Keynesian fiscal stimulus. Conservatives took the opposite position.
Carrie Bordoff Brown has a good story about the increasingly widespread belief among conservatives that failing to lift the debt ceiling would have no important economic consequences: They are the newest breed of government skeptics, the swelling ranks of Republicans who don’t believe the Obama administration when it says a failure to raise the debt limit will prove catastrophic. And they stand ready to make negotiations over raising the cap on debt as grueling as possible, making Treasury officials and Wall Street more nervous than ever that the country could suffer an unprecedented default
The U.S. appears to be the only country in the developed world that forbids its government from accumulating debt without authorizing legislation. And that’s led to some scary moments, including one that the economist Henry Aaron shared with me recently. During the early years of the Kennedy Administration, Congress passed an increase in the debt ceiling at the last minute. But when JFK went to sign the bill, according to Aaron, nobody could find the document.
The tax-cut war is over for now. “Don’t Ask, Don’t Tell” repeal has been signed into law. The New START treaty has been ratified. But another big battle between Democrats and Republican is looming. The subject is something most Americans have likely never heard of—the debt ceiling. And, unlike the lame-duck battles that somehow found their way to happy conclusions, this one could very easily end in disaster. The debt ceiling does exactly what it sounds like it does: It caps the total amount of money the government is allowed to owe.
Kevin Hassett, the director of economic policy studies at the American Enterprise Institute, former McCain campaign economic advisor, and co-author of Dow 36,000, has a column waxing indignant that Democrats would say they inherited the budget deficit from the Bush administration. Hassett argues that the Democrats are to blame for the deficit mess.