As David Leonhardt observes, ultimately the state of the public fisc depends an enormous amount on the rate of economic growth. The growth rate, in turn, depends to an extent on the existence of credible fiscal plans. But it’s important to keep an eye on growth.
It seems to me that it’s actually not a mystery how America could increase our rate of economic growth. In the short term, print money and start mailing it to people; say you’re going to keep doing it until we close the gap in nominal expenditures. That the policy elite seems to have persuaded itself that there’s some big mystery about how to achieve this baffles me—the guy in charge explained it quite clearly years ago:
Then there’s a bunch of perfectly textbook stuff. Create more legal routes for people to immigrate to the United States. Stop taxing imports of clothing. Let Americans buy as much foreign-grown sugar as we want to. Stop taxing imports of food. Close tax loopholes and lower tax rates. Let people build denser and with less parking if they want to. Use pricing to reduce the chronic congestion plaguing our most dynamic metropolitan areas. If we need more tax revenue, levy taxes on pollution not on work. Don’t keep so many people in jail and don’t make it so hard for them to get jobs when they get out. If Americans have some stuff they want to sell to Cubans, and Cubans have money to buy it, let us sell it to them.
There’s more to life than these items, and I also have some more exotic policy ideas. But this is all stuff that will boost growth. And it’s all stuff for which the argument why it will boost growth is uncontroversial. We have non-economic reasons for creating all these distortions, but in none of these cases are the reasons in any way compelling. Knocking it all off wouldn’t eliminate the need to continue the work of transforming the health care sector, but it would make things quite a bit easier in a whole bunch of ways.