Third Way Perspectives
October 3rd, 2012
This piece was originally posted on the Huffington Post.
Paul Krugman is one of America’s intellectual treasures, but he is stunningly off when it comes to the deficit. He argues that if re-elected, Obama should “just say no” to all efforts to seek a major budget deal. In so doing, he belittles Bowles, Simpson and others who warn about a looming and potentially crippling fiscal crisis. He’s not the only deficit denier, but Mr. Krugman is so respected by the left wing of the Democratic Party that his arguments could prove quite problematic.
His recent column opens with perhaps the most dangerous and short-sighted argument, namely that our historically low U.S. treasury rates prove that “we are not facing any kind of fiscal crisis.” But our rates are not at historic lows because of our chronic deficits, rather in spite of them. We are (in the eyes of those seeking to purchase the safest debt possible) the cleanest port-o-potty at the county fair thanks to the awful state of much of the rest of the world’s beleaguered economies. Read the rest of this entry »
August 3rd, 2012
Should Social Security be left out of this discussion, as Mr. Matthews suggests? Is it really only the health care entitlements we need to contain?
He is correct, and we showed in our paper, that over the past 50 years, all of Social Security’s growth relative to GDP has occurred in the first 20 years and has stayed roughly static since. But five percent of the economy is a lot. It’s roughly equal to Medicare, Medicaid and CHIP combined. And it’s not going to stay static – that is a certainly. In less than two decades, Social Security is poised to jump from 5.0% to 6.0% of GDP, according to CBO. One point may not seem like a big deal, but it represents a 20% rise in the cost of Social Security relative to the size of the economy. That’s not peanuts, especially since (as Mr. Matthews rightly points out and we also show in our paper) our health care entitlements will sprint ahead much faster. Read the rest of this entry »