Weekend Editorial Roundup
Here are the highlights from this weekend’s editorials on fiscal and budget policy:
Shortly after the House passed the Senate health care bill, the Chicago Tribune ran an editorial entitled "Victory--At What Cost?" in which they questioned whether the bill would actually reduce deficits over the first ten years. They pointed to an op-ed in The New York Times by former CBO director Doug Holtz-Eakin which re-calculated the overall bill (including reconciliation changes) without budgetary gimmicks. That op-ed claimed the legislation would increase deficits by $562 over the first ten years. The Tribune called on Democrats to re-craft a more modest legislation or include stronger cost-cutting measures.
The New York Times pointed out that the threat from credit rating agencies to downgrade the US's debt does not mean that policymakers should panic and start deficit-cutting measures now. They argued that, at least in the short term, the focus should be on unemployment and economic stimulus. They also pointed out that yields on Treasury bonds are extremely low, so at least for now "investors still seem to trust the Treasury more than they do the raters."
The Wall Street Journal criticized the Senate financial reform bill for potentially "mak[ing] Fannie and Freddie even more dominant in the business of mortgage-backed securities. They pointed to a provision that would require lenders who sell loans to retain 5% of the credit risk. The result, they believe, is that lenders would still be considered the owner of that loan and would have to reserve capital against the entire value of the loan. Fannie and Freddie guarantees would provide a way around this rule, making them the institution through which mortgage-backed securities would flow. Thus, they claimed, Fannie and Freddie could become an even bigger liability to taxpayers.
The Financial Times argued for allowing the IMF to craft a rescue package for Greece. They argued that such a package would not be a bailout, but rather would simply restore investor confidence in the country and prevent high interest costs from hurting Greece's commitment to deficit reduction. An IMF package would be to ensure that Greece has the "breathing space" to follow through on their commitment to fiscal balance.