I agree with the statements of a group of distinguished former chief advisors to Democratic presidents from their op-ed in the Washington Post:
A group of distinguished economists from the Hoover Institution, a public-policy think tank at Stanford University, identifies a serious problem. The federal budget deficit is on track to exceed $1 trillion next year and get worse over time. Eventually, ever-rising debt and deficits will cause interest rates to rise, and the portion of tax revenue needed to service the growing debt will take an increasing toll on the ability of government to provide for its citizens and to respond to recessions and emergencies.
None of that is in dispute. But the Hoover economists then go wrong by arguing that entitlements are the sole cause of the problem, while the budget-busting tax bill that was passed last year is described as a “good first step.â€
Entitlement programs support older Americans and those with low incomes or disabilities. Program costs are growing largely because of the aging of the population. This demographic problem is faced by almost all advanced economies and cannot be solved by a vague call to cut “entitlements†— terminology that dehumanizes the value of these programs to millions of Americans.
[…]
Just as entitlements are not the primary cause of the recent jump in the deficit, they also should not be the sole solution. It is important to use the right wording: The main entitlement programs are Social Security, Medicare, veterans benefits and Medicaid. These widely popular programs are indeed large and projected to grow as a share of the economy, not because of increased generosity of benefits but because of the aging of the population and the increase in economywide health costs.
about the red ink as far as the eye can see in the federal budget. Up to a point.
This statement:
not because of increased generosity of benefits but because of the aging of the population and the increase in economywide health costs
is a figleaf. Social Security retirement income benefits have increased at a rate at or below the rate of inflation for years. We have known about the increase in the number of recipients that is now occurring for seventy years and done nothing about it.
The reasons for our increasing debt are growth inadequate to match our desire to spend and health care spending full stop. Not an aging population. Not too low a tax rate. There is no level of taxation that will fill in the gap created by health care spending that grows at a multiple of non-health care economic growth and incomes year after year.
I wish such a distinguished panel had weighed in with their formula for increasing economic growth beyond its present inadequate level. I would be particularly interested in how they see growth increasing solely on the basis of retail and health care. The Republicans have expressed their opinion in the form of legislation. Time will tell whether they’re right.
“I wish such a distinguished panel had weighed in with their formula for increasing economic growth beyond its present inadequate level. ”
We already know what that program is.
“This demographic problem is faced by almost all advanced economies and cannot be solved by a vague call to cut “entitlements†— terminology that dehumanizes the value of these programs to millions of Americans.”
The language police are on the prowl. “Entitlement” is a dehumanizing word.
I don’t think we do. In eight years of the Obama Administration nothing other than very short term economic plans were ever enunciated. ARRA? After two years everything had returned to trend. Clean energy? Not much has come of that other than doling out money to a few donors. The big beneficiary of clean energy programs here and in Europe has been China.
I think these cats want to be in charge of rearranging the deck chairs. They’re not needed for that. That’s the critical problem that progressivism faces, not just here but everywhere. Without hope for the future it’s a big fat zero.
The program is probably all the usual suspects that Democrats have repeated for a long time – “Investing” in infrastructure and Education, taxing the rich to pay for it, etc.
Whether that formula will actually work is a different matter.
As Lincoln said whatever you call it a tail is not a leg. The likelihood is that those are consumption not investment. I say “likelihood” because the specifics matter. A bridge to nowhere is not an investment. Neither is a degree that doesn’t get you a job. Neither is spending more for the same infrastructure or the same education. Ensuring that what would otherwise be consumption is investment requires a level of discipline the Congress has never shown a willingness to exert.
But it makes no difference. As long as expenses grow faster than revenues there’s a fundamental political problem. You don’t just need to increase taxes. You need to increase them again and again and again.
The highest proportion of GDP devoted to the federal government in peacetime is about 24%. In 2017 in was 20.5%. That doesn’t leave a lot of headroom. The recent tax cut is likely to have reduced that but we don’t really know by how much.
Personally, I’d like to see more spending on research and development. Memory says corporations and the federal government used to spend quite a lot on research on transistors and other electronics back in the 1950’s and 1960’s. Something might have come of that. Also, beginning in the late 1960’s people spent a lot of effort and money on new computer languages and computer architectures. It’s possible that will pay off someday!
Also, those of us with long memories may recall humans used to go off to the Moon and dreamed of going further. Interest in that sort of thing has subsided considerably in the last half century. Other people dreamt of cities under the ocean and mining underwater depths for resources. Bet you’re all glad nobody talks about that anymore! Also, there used to be talk about nanotechnology — building machines on the scale of molecules for medical and manufacturing purposes. Fortunately, nobody but some aging engineers even remembers these ideas.
There are one or two emerging technologies that look to be popular in the future, however. The most significant is 3-D printing. Once this was announced a few years ago, the internet lit up with a veritable explosion of enthusiasm, because soon the average citizen will be able to guns and ammunition in his own living room! So much fun to look forward to!
Of course, these are very old fashioned ideas. Economists and businessmen — and even some politicians! — used to gab about the benefits of R&D programs a half century ago and pretend it would lead to an era with ever rising incomes and, uh, futuristic futures, We’re all so much smarter now. The politicians gave up on the silly tomorrowland stuff in the 1970’s, businessmen in the 1980’s, and somewhere in the 1990’s the last of the economists had become persuaded that R&D spending is at best a religious idea — a disreputable cult thing, in fact — and they’ve happily eliminated it from their theories. So today, we’re all much better off.
There you are, Dave. Fifty years of history. Did I neglect anything?
I first heard of impending doom and damnation caused by the national debt during the election of 1952. Here we are 67 years later and it’s still just around the corner.
We did, in fact, have a period of rapid inflation from about 1975 to 1983 – during which time the debt to GDP ratio was at its lowest point in the last 70 years.
https://www.google.com/imgres?imgurl=https%3A%2F%2Fwww.factcheck.org%2FUploadedFiles%2F2012%2F02%2FDebt2GDP.png&imgrefurl=https%3A%2F%2Fwww.factcheck.org%2F2012%2F02%2Fdueling-debt-deceptions%2F&docid=8BBUk4tzaEBGsM&tbnid=P_ljcJoFZ6igJM%3A&vet=10ahUKEwjdw6Wjra7aAhXCdd8KHROxARsQMwhbKBUwFQ..i&w=599&h=386&bih=693&biw=1966&q=us%20debt%20to%20gdp%20historical&ved=0ahUKEwjdw6Wjra7aAhXCdd8KHROxARsQMwhbKBUwFQ&iact=mrc&uact=8
“The reasons for our increasing debt are growth inadequate to match our desire to spend and health care spending full stop. Not an aging population. “
Not really. There is an entire branch of finance that recognizes that in some situations cash generation and spending requirements are grossly mismatched. It’s called “structured financeâ€. It’s employed in project finance and capital intensive industries, where capital investment comes in chunks. You tailor the realities.
The baby boom bulge has affected US economics for many decades. It’s no surprise it is now affecting aging related expenditures. No reasonable person would ascribe lack of growth as the issue causing financing issues related to this spending bulge. Economies don’t grow at sufficient rates.
Either a sinking fund should have been established, or debt capacity reserved for this oh-so-predictable event. But we are talking politicians, and therefore irresponsible people.
And people wonder why I distrust government.
That’s precisely my point.