By Russ Roberts
The opinions expressed are his own.
Reuters invited leading economists and writers to reply to Larry Summers’ op-ed on his reaction to the debt ceiling deal. We will be publishing the responses here. Below is Roberts’ reply. Laura Tyson, James Hamilton, Donald Boudreaux, Robert Frank, Benn Steil and James Pethokoukis as well.
Summers begins with a refreshing instance of honesty about the effect of the debt deal:
Despite claims of spending reductions in the $1 trillion range, the actual agreements reached so far likely will have little impact on actual spending over the next decade.
It is hard to reconcile this likely truth with the accusations coming from the left that Obama has caved and the Republicans are “terrorists” for “slashing government spending” but such is the nature of political life these days. Summers is also right about the importance of the baseline. When is a cut not a cut? When it’s a reduction from an artificially high baseline. There is very little austerity in the debt deal.
Summers next claim is harder to swallow:
The deal confirms the very low levels of spending already negotiated for 2011 and 2012, and caps 2013 spending about where most would have expected this Congress to end up.