Louisiana Gov. Bobby Jindal, who seems to think he’s a potential candidate for the Republican presidential nomination in 2016, apparently is under the misimpression that the fiscal cliff poses the risk of an immediate increase in budget deficits.
The truth of the matter, as I noted HERE the other day, is exactly the opposite. Going over the fiscal cliff would sharply reduce budget deficits, at least at the outset. The immediate deep cuts in federal spending and increases in taxes across the board would push budget deficits down but might also push the nation into another recession.
But Jindal got it all backwards in a column he wrote for Politico urging adoption of a balanced budget amendment.
Jonathan Chait has mocked Jindal THUSLY:
The reason the “fiscal cliff” is scary is that it theoretically entails reducing the budget deficit next year by half a trillion dollars — a contractionary effect strong enough that, if left in place (which it won’t be), would send the economy back into a recession.
But of course if we had a balanced budget amendment in effect, we wouldn’t be implementing half a trillion in immediate deficit reduction. We’d be implementing a trillion in deficit reduction. And such fiscal cliffs would become a regular feature of American budget policy. Any time the economy heads into a recession, the projected deficit rises as revenue shrinks and spending automatically rises. The 2008 recession caused the deficit to automatically rise, even without a stimulus, by some three quarters of a trillion dollars. A balanced budget amendment would require us to impose massive contractionary policy that would dramatically worsen any downturn.
The only way Jindal’s argument makes any sense at all is if you read it to mean that, as many people seem to think, the “fiscal cliff” means “high deficits” rather than “deficits shrinking too fast.” That’s the smart interpretation of his argument. The non-smart read of his argument is too incoherent to express in words. This from one of the GOP’s most touted brains!