American voters want more public services than they are willing to pay for. That is the country’s fiscal problem in one sentence. When it comes to public finance, the “live now, pay later” mentality that caused the economic collapse still prevails.
Figures show a strengthening recovery in the last quarter of 2009. Welcome as that may be, even a sustained expansion cannot balance the books in the longer term. On current policies, the permanent gap between spending and revenues is at least 6 per cent of output.
Will the administration’s new budget help? Not really. The US budget is not a policy announcement, but a minutely detailed wish-list. The press reports it gravely, in suspended disbelief. Congress then ignores it in whole or in part depending on how the wind is blowing. President Barack Obama’s new proposal, which Congress receives today, will say more about his reading of the political climate than about where fiscal policy is headed.
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