One last thought on the Hamilton Project- I believe they do not serve the cause of fighting inequality.

Stay with me on this one. Take this statement:

Industrial policies and direct market interventions can try to change the before-tax distribution of income. But ultimately such policies harm the economy—for example, excessively high living-wage laws can result in large job losses for low-skilled workers.

Factually, I believe the statement is wrong. Government intervention in markets can promote the common good. Everything that's known about health care provision is a case in point.

As for its politics, the statement gets to the heart of what's wrong with the Hamiltonian philosophy, which posits that government is wasteful but nice, and the market is cruel but efficient- the "Mommy-State and Daddy-Market" philosophy, one that seems to dominate the economics profession from Brookings all the way to George Mason University.

Hamilton's version of this story is less crazy than others. But it is fundamentally the same- it denigrates government and puts the market on a pedestal. Worse, all varieties of the message are legitimized when one comes from the "non-partisan" Brookings Institute.

Look, this kind of behavior just isn't helpful. It might have been cool in the '80s and the '90s, but it's not cool anymore. Our country now has big problems to face up to- inequality, the health care crisis, global warming, etc.- that can't be solved with tax breaks. It's going to take vigorous collective action, and our best collective institution is and will probably always be the federal government. Belittling it like the Hamiltonians do only serves the interests of people who don't want to do anything about these problems (a point made well in this interesting article on inequality by James Lardner).

That's why it's hard to swallow the Hamiltonian's professed interest in reducing inequality. If they really did, they would scale back their assault on government. But they don't take seriously anyone who believes in governmental efficacy, so why even bother with them?

The Washington Post reports today that the Democratis Blue Dog Coalition plans to introduce legislation shortly to

impose caps on some spending, enshrine pay-as-you-go rules in federal law and authorize automatic spending cuts to enforce them ... amend the U.S. Constitution to require a balanced budget and to create an array of budget provisions that would focus more attention on what it sees as pork-barrel spending.

While setting a goal of producing a balanced budget is meritorious, the approach advocated here is problemmatic. It may, for example, gratuitously restrict policy flexibility, particularly where circumstances such as war, natural disaster, etc., arise.

CBO's Monthly Budget Review has been released:

The federal government incurred a deficit of $152 billion during the first eight months of fiscal year 2007, CBO estimates, $75 billion less than the shortfall recorded through May of last year. In comparison with receipts collected during the same period in 2006, revenues have risen by about 8 percent; outlays have grown by less than 3 percent. CBO expects that the government will end 2007 with a deficit of between $150 billion and $200 billion.

The Government Accountability Office (GAO) has released the latest version of their "The Nation's Long-Term Fiscal Outlook" report today. As with previous reports, GAO finds little change in the long-term outlook and warns that current fiscal policies are unsustainable (duh!).

Despite re-stating the important fact that current policies are unsustainable, the report also helps to distinguish what is driving long-term imbalances. Instead of lumping Social Security and Medicare together and labeling the problem as an "entitlement" one, the GAO report highlights health care costs generally as the major obstacle. The relevant paragraph from the report states:

Although Social Security is a major part of the fiscal challenge, it is far from our biggest challenge. Spending on the major federal health programs (i.e., Medicare and Medicaid) represents a much larger and faster growing problem. In fact, the federal government's obligations for Medicare Part D alone exceed the unfunded obligations for Social Security. Over the past several decades, health care spending on average has grown much faster than the economy, absorbing increasing shares of the Nation's resources, and this rapid growth is projected to continue. For this reason and others, rising health care costs pose a fiscal challenge not just to the federal budget but to American business and our society as a whole.

Under the leadership of Comptroller General David Walker, the GAO continues to bring an important and under appreciated voice to long-term fiscal policy debates. The short report is worth a read:

GAO: The Nation's Long-Term Fiscal Outlook