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For the Long Run

By Matthew Yglesias  

"For the Long Run"

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Matt Miller writes the deficit hawk’s case for running a giant short-term deficit but says it would be worth thinking short-term about what can be done in terms of the long-term deficit:

Bob Litan of the Brookings Institution suggests building such triggers into Obama’s blueprint from the start. Once unemployment gets back beneath 6%, for example, we could require a supermajority vote in Congress to run deficits higher than, say, 2% or 3% of GDP (by comparison, the trillion dollar figure will push us toward 7%, an all-time high).

Yes, promises like this can be broken. But given the extraordinary circumstances, writing this kind of future restraint into law would tell world markets that we know the debt spree has to end. Obama could also set up a bipartisan commission on Social Security and Medicare with a view to building consensus for action in a second term, by which time the current crisis will, with luck, be a fading memory.

This first idea seems problematic. If you have a weak economy and a huge deficit that succeeds in strengthening the economy, you don’t really want to pivot on a dime and implement a catastrophically sudden fiscal contraction. You’d probably have to change it to be more of a sliding-scale thingy. Besides which, the real long-term issue is the long-term projections — i.e., Social Security, Medicare, and Medicaid — rather than the precise issue of how big the 2011 deficit is going to be. Appointing “a bipartisan commission” would be nice, but what would you be asking the commission to do? Social Security is prone to some basic split-the-difference compromises, but to save money on Medicare you really need to restructure the whole American health care system.

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Of course broad restructuring of health care is on the Obama agenda. But I think it would be overly optimistic to expect the first round to result in substantial cost savings. So it’s hard to see what beyond promissory notes you could offer. On Medicaid, by contrast, you’ve got this interesting proposal from Bobby Jindal. That’s happening right now, and the federal government could work to simultaneously push Louisiana in the most constructive possible direction and also, given that, try to facilitate reform and spread best practices to other states. Realistically, that seems like the most promising angle.

The other slice of this is the defense budget. It’s a really big budget. And though it’s desirable in some respects to have this military that costs wildly more than anyone else’s, it’s not really necessary in any recognizable sense. As my colleague Nina Hachigian writes today “Our annual defense outlays are laden with tens of billions of dollars worth of irrelevant weapons systems, such as the F-22 fighter plane—a weapon that costs over $350 million per plane—and would likely be useless if we ever did enter a head-to-head conflict with a big power some decades from now.” To my view, this situation needs to be a huge part of the conversation about keeping Bob Gates on in the Pentagon. He’s made noises in the past indicating that he’s sympathetic to the need for reform. But it’s also under his watch that this plan for a DOD budget ambush on the incoming administration has been hatched. If Gates isn’t willing — eager, I would say — to help push back against that kind of thing, then I’m not really sure what his utility is.

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