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.