Dealing With Debt --- Let's Debate

|Peter Boettke|

Martin Feldstein offers some thoughts on how to deal with the debt problem threatening the health of the US economy.

What do you think?

Comments

[Barkley Rosser]

Well, much of this is boilerplate: one party refuses to accept serious spending cuts while the other refuses to accept tax increases, any tax increases. Duh.

As for more Feldsteinian touches, he has been after social security for decades, so no surprise he is at it again, although it is not the main source of fiscal problems for the US, and his proposed changes do not necessarily offer much in the way of savings. If one wants to make SS help, it is either raise taxes or cut benefits. Again, duh.

Medicare and Medicaid are clearly a problem, and it is depressing that there was this major effort at health care reform that ended up not doing much at all, despite all the nearly mindless screaming hysteria that accompanied it. Heck, it did not even bother to get all the way to full health insurance for everybody, instead being a minor modification of the AEI/RomneyCare plan.

To really cut the growth of medical care costs one would need to actually cut into the incomes of various interest groups favored by one or the other parties, with all basically protecting themselves in the process. So, maybe we would have gotten somewhere if after the last election McCain and Obama had sat down and said, "OK, you screw the lawyers, and we'll screw the pharmaceutical companies," or something like that. But it did not happen.

As it is, there actually are cost cutting, or restraining measures in Obamacare (the COB continues to project it as saving money), but ironically those cost cutting parts are some of the parts that have come under the severest criticism from opponents. In any case, Uncle Martie does not have much to offer, certainly not anything new of particular interest. Same old same old duh.

[Jerry O'Driscoll]

Certainly in the long run, entitlement reform is absolutely necessary. But Rand Paul produced an actual budget with very large cuts without getting into entitlement reform.

Anyone wanting alist of cuts can go to Cato's website and the section on downsizing government. You'll get a department-by-department list. (I prefer eliminating whole departments myself.)

We have a leading presidential candidate advocating a substantial increase in defense spending. It's madness.

Both sides will need to get serious. Allan Melzter had a good piece in last week's WSJ in which he through down the gauntlet to Republicans. It is only possible to have permanent tax cuts with permanent spending cuts.

[Barkley Rosser]

Jerry,

I have not been through Rand Paul's budget, but I am aware of only five programs costing more than $100 billion per year, and one of those is interest on the national debt. Three of the others are Social Security, Medicare, and Medicaid, with the fifth being defense, so I find it hard to believe he can balance the budget without hitting entitlements, or else making some wildly unrealistic assumptions about economic growth, which we have seen done plenty of times by many.

Regarding Feldstein's piece I support his view on "tax expenditures," although I find this particularl locution to be seriously annoying. It has been cooked up to try to get Republicans to support revenue enhancements through tax simplifications, with this goofy label that makes it sound like one is cutting spending rather than raising taxes.

I also note that Feldstein says practically zero about defense spending, which clearly could come down. Don't know what Rand Paul has to say about that either, although if he does not want to cut that or any entitlements, and no tax increases, I seriously doubt he can (could) credibly balance the budget.

[Allan Walstad]

Feldstein: "A major reason for the accelerating growth in government debt is [America’s rapidly aging population and the resulting increase in the cost of the universal pension and health-care programs –] Social Security and Medicare."

Just cut out the distraction between the (my) brackets. An aging population isn't a problem if people have been saving (hence accumulating productive resources) for their own future retirement and medical expenses, as is appropriate is a free society. It IS a problem when the pols have short-circuited that process with schemes to pay those bills on the backs of the younger generation.

[K Sralla]

Rules of the game will not change without a major crisis far beyond that already experienced in the U.S. and Europe.

I am quite convinced that there must first arise a stage of serious inflation. Let's face reality; It is politically impossible to actually cut the big entitlements and the military complex, plus raise taxes significantly under the current political rule structure. Almost certainly, the printing press will be tried first.

Count me a pessimist.

[Jerry O'Driscoll]

Barkley,

I said you can come up with major cuts today w/o going after entitlements. I didn't say it would balance the budget. It was a proposed budget for 2012.

Go look at the Cato list. There are some big items, but many "modest" program cuts. It's a long list.

If memory serves me, Feldstein wants to increase defense spending. Defense spending is the infrastructure/job creation program of some Republicans.