William Galston, a Democrat, uses his Wall Street Journal column to argue for fiscal prudence:
We’re backing ourselves into a fiscal corner. Annual outlays for Social Security will rise by about $1 trillion over the next decade, as will outlays for Medicare. But Mr. Trump has ruled out cuts to these programs, bringing his party into alignment with the Democrats’ longtime stance. Nor will Republicans accept tax increases. Meantime, projected defense spending falls far short of what will be necessary to protect the U.S. in an increasingly dangerous world. And there won’t be any room for additional domestic spending on young families with children. Taking the path of least resistance—increasing spending without increasing revenue—will make a bad fiscal situation worse.
Add to this that the U.S. is a rapidly aging society. Americans 65 and older made up 9% of the population in 1960. Today, this figure is 18%, and it’s projected to rise to 23% over the next three decades. As older Americans’ share of the electorate increases, so will the cost of guaranteeing them basic income and medical security. I doubt many elderly voters will rally around a fiscal strategy that reduces their benefits.
Continuing on our current fiscal course will mean a gradual loss of America’s financial independence followed by an abrupt economic decline. The U.S. will have to ask the rest of the world to finance its debt, and it’s reckless to assume that other nations will do so indefinitely. The risk is that countries the U.S. relies on will draw back gradually—and then suddenly, when some unforeseen shock crystallizes their mounting doubts. As the late economist Herb Stein quipped, “If something cannot go on forever, it will stop.”
We have to recognize the consequences of these realities and start taking steps to secure America’s fiscal future. Leaders with vision should address these issues realistically and make the case to the public that they must either pay for the programs they want or agree to cut them. Faced with this choice, I suspect that voters would support the higher taxes that are needed to stabilize Social Security and Medicare for decades to come, help families with young children, and defend the country against mounting threats.
All I can say to Mr. Galston is welcome back to the fight. I wish I knew our side will win.
Sadly, I think it very unlikely. Both Republicans and Democrats are addicted to free beer, they just take it in different forms. The Republicans take theirs in the form of tax cuts while the Democrats take theirs in the form of not curbing spending.
There are two things I have missed in the several columns and editorials I have read recently on our growing debt. The first is that there is empirical evidence that public debt overhang constrains the rate at which GDP can grow. The second is deadweight loss.
Too many interests directly benefit from high spending and low taxation, so the deficit is beyond control, or even moderation. Moreover, social welfare spending cannot be cut, none of it. The Social Security and Medicare deficits will be paid out of general revenues and new borrowing.
The US deficit and interest payments will continue to grow geometrically. They will grow faster than the economy, and faster than inflation. All other spending, including the military, will be squeezed out, and it will decline in real terms as inflation erodes the dollar. This is what happened to Europe, and it is why NATO is an empty shell.
The fact that real spending on the military and all other non-welfare programs is shrinking will be hidden by inflation. But the cuts will be real, and the military will shrink. At some point, the US will begin reducing the number and size of its overseas bases, and will curtail its overseas deployments and naval patrols.
The slow demilitarization of the US is highly desirable. Of the 250 or so wars since 1945, the US started over 80% of them, and we always attacked a country that was at peace with us and our allies. Granada, Panama, Afghanistan, Iraq, Libya, Ukraine are all good examples.
By the way, Somalia is our longest war, now entering its fourth decade. The longest was the Indian Wars, running from 1607 to 1918.
Galston, Hanson, and Meade are all spokesmen (shills?) for the regime, and party labels are irrelevant.
Meh. They are all playing chicken. Whoever gets stuck being in power when things crash will need to do something that people wont like. Big spending cuts, but tax increases or maybe some of both and the other side will demagogue it so that the side making the changes loses th next election.
Steve
At that point, no one will say “Meh”.
steve: Whoever gets stuck being in power when things crash will need to do something that people wont like.
Waiting for the crash is too late. When a crash occurs, receipts drop precipitously. Cutting spending or raising taxes at that point will then send the economy into a tailspin. Deficit spending needs to be addressed well before then.
When Clinton raised taxes and cut spending, every single Republican voted against the plan claiming it would crash the economy. Vice President Gore cast the deciding vote in the Senate. A lot of Democrats then lost their seats. {People are funny that way.} However, it led to the longest economic expansion in the post-war period, as well as cash surpluses. {Imagine that.}
Gore then advocated for setting aside the cash surpluses in a “lock box”. Bush wanted to cut taxes during an economic expansion, contrary to Keynesian countercyclical policy. The American people chose Gore; but due to a peculiarity in the U.S. electoral system, Bush became president.
In 2000 our federal debt to GDP ratio was 33%. Now it’s 122%. There is empirical evidence that it makes a difference.
Please note that I have opposed Bush’s tax cuts and Trump’s tax cuts.
Shameful that so many multinational corporations are birthed in America, and yet they incorporate overseas to “fulfill their fiduciary obligations “.
We as a nation need to find a way to paywall our own nation, companies that utilize our tax supported infrastructure should pay for it. But no one, including myself, expects them to volunteer.
You really can’t balance the budget by extracting money from the poor.