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Home Publications Blogs Beat the Press Dana Milbank Has Problems With Big Numbers

Dana Milbank Has Problems With Big Numbers

Sunday, 03 October 2010 08:17

That was what he told Post readers in his column. He talked about President Obama's deficit commission as "the last hope for gaining control of government spending," telling readers that:

"The problem is so big as to seem insurmountable: $13 trillion of debt, now equivalent to 60 percent of gross domestic product. In 10 years, that is projected to increase to 90 percent of GDP, at which time we'll be making $1 trillion a year in interest payments." 

People with more familiarity with numbers would note that the country has had larger debt to GDP ratios in times past. They would also point out that that the $1 trillion in interest payments is less than 5 percent of projected GDP in ten years. The government faced the same interest burden in the early 90s.

Furthermore, unless the Fed acts irresponsibly (a big if, it did allow the $8 trillion housing bubble that wrecked the economy), it will own much of the government's debt. In this case, the interest will be paid to the Fed, which in turns will rebate it to the Treasury leaving no net interest burden. Currently the Fed is rebating an amount equal to almost 40 percent of the interest paid by the Treasury. Reporters at most newspapers would be expected to understand this relationship.

It is also not clear what Milbank thinks is out of control about government spending (maybe he sees flying saucers also). Government spending has mostly increased to support the economy in response to the worst downturn since the Great Depression. His column suggests that he may be unaware of this downturn.



Comments (6)Add Comment
written by izzatzo, October 03, 2010 11:12
Under the Broken Window Theory, when enough windows are broken, the neighborhood goes to hell because even more windows are broken beyond a point-of-no-return until all the windows are smashed.

Experts like Dana Milbank understand this theory well and how it explains the death spiral of the deficit and debt. Once government spending passes the critical threshold, there's no hope of fiscal stability under the Broken Economy Theory.

Conduct a behavioral economics experiment in your neighborhood today. Throw a rock through a window and wait to see if another rock is thrown. If not, continue deficit spending until the tipping point occurs and it's too late to turn back under a hail of incoming rocks.
To argue with Dana Milbank superstitions is instructive to us
written by Scott ffolliott, October 03, 2010 1:42
To argue with Dana Milbank superstitions is instructive to us because they are the superstitions of most journalists, business people and householders. No matter how the rational arguments are made, the “feelers” (a Thatcherite term) will follow those superstitions. Perhaps, Dean Baker can team up with George Lakoff to create a presentation that can beach this armor of superstition.
Broken Window?
written by Some Guy, October 03, 2010 5:15
Assuming that a broken window begets more broken windows until society breaks down, there's still a broken window, i.e. manifest evidence of society's impending decline.

With regard to the debt / deficit, what's the broken window? Interest rates? Or is it just the level of 2009-10 deficits? (Which, if so, just assumes what you're trying to prove.)
written by bobbyp, October 03, 2010 5:55
The truly sad part about this is the fact that if you pressed Dana really really hard, he'd claim to be a "librul".
written by bobbyp, October 03, 2010 5:57
Hey! Some Guy! Can I get some of what you are smoking?
written by sherparick, October 04, 2010 11:27
Today investors are so terrified (NOT!) about government deficits is that they lowered the price on 10 year Treasuries to 2.49%. Yes,
Gold is going up, but Gold is going up because the Chinese and Indians are even more superstitiuos about the Gold than we are, because China and India do have some inflation concerns (in part due to their large trade surpluses with the U.S. and stubborness about revaluing their currenies.), and Gold, because it is very like "money" is something people want to hoard during times of panic and deflation, something that Say and Mill first described in the aftermath of the 1825 financial crisis.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.