The Wall Street Journal’s headline for my article today In Praise of Debt Limit ‘Chicken’ nicely conveys the idea that linking a hike in the debt to a cut in spending—which pundits call a game of chicken—is not a game at all. It’s good economic policy. Economists in Washington should show some leadership and try to implement that policy.
But political leadership is needed too, and from the White House not just from the House of Representatives. Here President Obama could take a page from historian David Kennedy’s Freedom From Fear (page 138 to be exact) which describes how none other than FDR, in March 1933, showed political leadership and trimmed the largest entitlement of the day. As I explain in this short piece from today’s Bloomberg View’s Echoes, the entitlement in question amounted to 25 percent of the budget, a much larger percentage than Social Security today.