Obama Adviser Strikes Back!

Austan Goolsbee, an economics professor at the University of Chicago and Barack Obama's affable top economic adviser, takes issue with my recent post "Obama and (Even) Higher Capital-Gains Taxes." In an E-mail I got last night, Goolsbee writes: "Jimmy, You know I love reading your posts—you keep us on our toes. One objection, though, on factual grounds with this one."

This is the offending passage that Goolsbee goes on to cite:

In a recent chat, Austan Goolsbee, Obama's economic adviser, told me that the candidate was not in favor of equalizing income and capital-gains rates. Yet consider this: Obama says he intends to, at minimum, make the budget deficit no worse. But in my conversation with Goolsbee, it was clear that the campaign is underestimating the size of the 2009 budget deficit by $100 billion or more.

And here is Goolsbee's response:

Your beef here is with PRESIDENT BUSH—he's the one that is understating the deficit (predicting $400b when the private sector is saying $500b+). I am under no illusions about how much he is hiding. The reason I said Obama will not make the deficit worse is that he [will] more than pay for every program and every tax cut he has proposed. The size of the Bush deficits have no bearing on that. No matter how much deficit Bush is hiding, Obama will make it smaller.

And here is the actual transcript from my interview with him:

The latest Goldman Sachs estimate I saw had the 2009 deficit at $500 billion. Might a lot of Obama's investment agenda have to go by the wayside and he'll have to focus a lot more on deficit reduction?
Well, I'll say this. I haven't seen the Goldman Sachs estimate that you said, but I know the president has forecasted that for next year [the budget deficit] will be 400-and-something billion. Now included in that is some stimulus, so I'm not exactly sure, you know, what the first year would be. In the program that Obama has outlined, it does not increase the deficit. If you add up [all his spending increases and cuts, tax increases and cuts], it does not increase the deficit and very likely reduces it by the end of his first term.