Long and Short

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Kevin Drum thinks proponents of additional fiscal stimulus have an obligation to talk more about our ideas for bringing the budget into long-term balance.

I somewhat disagree with that. The measures necessary create long-term balance are politically problematic and also necessary whether or not we engage in fiscal stimulus in the short-term. Consequently, you give people a misleading portrait of the choices facing the country if you explicitly tie long-term fiscal responsibility to short-term stimulus ideas—people may look at your proposal and say “yuck, let’s not do that.” But eschewing stimulus doesn’t change the need to alter the long-term trajectory. Consequently, these ideas should really be kept separate.

But by all means, let’s talk about curbing the long-term deficit! The two best ideas are substantial cuts in defense spending and capping tax deductions for high income households. Beyond that a lot comes down to political bargaining. But it’s better to look for ideas that accomplish other things besides deficit reduction. Taxes on carbon emissions, gasoline, sugary sodas, and highway congestion ameliorate social problems along with raising revenue. Cutting Social Security benefits saves money, but doesn’t achieve anything else. By contrast, imposing a 50 percent co-payment on Medicare services with total copays capped at 7.5 percent of income would save money while protecting the poor and hopefully slowing the system-wide growth of health care costs. Curbing tax subsidies for dirty energy saves money and improves the environment. Also appealing are a certain number of sly ideas like switching to the C-CPI-U as our preferred measure of unemployment which would in effect raise taxes and cut spending across the board, but can also be defended as nothing but a technical improvement to our public data.