Editor's Note: We asked several influential voices in academia, media, government and finance for their thoughts on Friday's budget deal. Here's what they had to say.
The budget deal literally changes the direction of federal spending. As the chart shows the deal ratchets down the Obama Administration's proposed increase in discretionary spending for 2011 to an actual decrease. A year ago the president called for an increase of $39 billion. The agreement calls for a decrease of $39 billion. No one could have predicted such a turnaround a year ago.
Of course this is just the first step. Next is the 2012 budget. But this step helps establish the credibility essential for completing the job.
Some might disagree. True the amounts are small compared to the trillions needed. So think of a football game where one team—the sound fiscal policy team—is down by three touchdowns in the fourth quarter. They've been hammered the whole game. Now they have a fourth down and 2 on their 38-yard line. They go for it. They make it. True its only 2 yards and they need 60 more for a touchdown and then three more touchdowns and an impenetrable defense. But the short gain establishes their credibility and they go on to win.
We really never know whether a play is a game-changer until after the game, and even then it's debated. But this may well be one of those plays.
Mr. Taylor is a professor of economics at Stanford and a senior fellow at the Hoover Institution.