Debt And The Millenials

I spoke on this subject to students last night at the Cato Institute and thought I might put my bullet points here. Was trying to speak to a mostly libertarian audience:

— If you’re interested in backward-looking debt, the fault is overwhelmingly George W Bush’s. He not only enacted a lot of debt-increasing measures, he did so in a way that destroyed the credibility of Clinton-era Democratic Party deficit hawks and obliterated the political conditions under which preemptive fiscal adjustment was possible.

— Fortunately, backward-looking debt, though high, is not the cause of any actual problems today.

— Similarly, projected future debt is not the cause of any actual problems today, though it will be at some point.

— Since the problem is overwhelmingly one of projected future increases in spending, it’s perfectly reasonable to expect that the majority of change relative to baseline will come on the spending side.

— But since the problem is overwhelmingly one of the growing cost of longstanding commitments, rather than new commitments, it’s absurd to expect the change to be entirely on the spending side.

— Growth matters, a lot, especially if you’re young.

— What you spend on and what you tax matters more than “how much” you spend and tax. Taxing pollution and reducing expenditures on bombs has very different implications from taxing labor and reducing expenditures on school construction.

— It’s absurd to be spending large and growing sums of money preventing people from moving here while simultaneously facing a Social Security shortfall driven primarily by unexpectedly slow population growth.

— Young people should push, at the margin, for any cuts in Social Security/Medicare spending to be implemented sooner rather than later. Proposals to let everyone born before 1955 evade any cuts forever are unreasonably punitive to the youngest generation and yet are universal dogma in DC. Complain about this!

— At any politically plausible margin, it makes more sense to take $1 out of Medicare than to take it out of Social Security. Social Security checks can be used to buy health care services.

— What’s controversial among the public is the desirability of reducing projected increases in Medicare spending, what’s controversial among wonks is the desirability of different methods of reducing projected increases Medicare spending.

— Be wary of people who deplore “price controls” for health care and also claim to favor reducing health care expenditures.

Last (which I didn’t say) the future will almost certainly be better than the past. The main risks to this outcome are in the foreign policy and ecological domains. So don’t sweat the fiscal policy too much.