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Brooks Wilson's Economics Blog: Consensus of Economists on the Debt?

Thursday, March 24, 2011

Consensus of Economists on the Debt?

(HT Mankiw) Economists believe that the mounting national debt threatens the long term financial stability of the United States.  Cutting waste, a solution from the right and taxing the rich, a solution from the left are inadequate; entitlement programs must be addressed.  Ten former chairmen and chairwomen of the Council of Economic Advisers, four who served Democratic presidents and six who served Republican presidents support the Bowles-Simpson report, “The Moment of Truth,” as the starting point of legislative action involving both parties (Politico, “Unsustainable budget threatens nation”).
While the actual deficit is likely to shrink over the next few years as the economy continues to recover, the aging of the baby-boom generation and rapidly rising health care costs are likely to create a large and growing gap between spending and revenues. These deficits will take a toll on private investment and economic growth. At some point, bond markets are likely to turn on the United States — leading to a crisis that could dwarf 2008…This is your teaser
“The Moment of Truth” documents that “the problem is real, and the solution will be painful.” It is tempting to act as if the long-run budget imbalance could be fixed by just cutting wasteful government spending or raising taxes on the wealthy. But the facts belie such easy answers.
Alice Rivlin, the first Director of the Congressional Budget Office, makes a similar observation (Brookings, “Address the Real Budget Issues”)
Squabbling over federal spending for the few months left in this fiscal year is a distraction from the serious deficit threats of the future. Threatening a costly, pointless government shutdown is just plain silly. Our elected leaders should turn to next year's budget and start sorting out needed government activities from lower priority ones we can live without. The president has offered cuts in long-standing programs to fund investment in future growth within a constrained total. He and Congress should work together to decide what we most want our government to do as we all tighten our belts. This will take hard work and willingness to compromise, not posturing and sound bites.

Even more important, we must also slow the long-term growth of Medicare and Medicaid and make Social Security solvent. We must reform our absurdly complex, inefficient tax code so it raises more money at lower rates. Otherwise, we face a debt catastrophe that could destroy our prosperity and world influence. These tough decisions must involve both parties working together so that neither side can blame the other for what has to be done.

Brave young people are risking their lives in the name of democracy in far places. Can't we show that our democracy works right here right now?
The added emphasis through bolding is mine. 


  1. It is dissapointing to see how much debt we have as a country while throwing money over seas by the minute. I understand that we should help other countries but we should be focused on our well being as well. I agree that cutting wasteful spending and taxing the wealthy more will not solve the problem, but it will help. Cutting wasteful spending is something the government should have been doing all along and is a step in the right direction.
    The healthcare system is a bit harder to tackle. People in our society today view the government as a crutch that should help them in everything but then complain when they have to pay taxes. It will take a mass change in mindset to fix this, the government wasn't originally designed to be the fix all and have their hands in everything. People will need to start taking responsibility for themselves. Personally I do not want the government, one of the most inefficient organizations we have, to run health care.

  2. AliciaCastro4/4/11 7:45 PM

    I belive that we can never truly predict how our economy will be in a couple of years because of "random walk", which is "the path of a variable whose changes are impossible to predict". Who is to say how much in debt our nation will be in the next 5 months? An unstopable natural disaster could hit our country and set us back millions thus cutting down budgets for other expenses.

  3. I just watched Bowles and Simpson on Charlie Rose

    and have been sending the link to everyone I know.

    This is a discussion we HAVE to have but they're right. The first step is to get the legislature to admit there's a problem. See the problem here is we have such short attention spans that this could be enacted and you won't see the benefits for a few years. Then what happens? They get voted out for making a tough decision and when it all turns around, the people in office get the credit.

    For this type of thing to pass, you are going to have to get the old school congressmen out. This is going to to a young, enthusiastic group to get this pushed through.

    I hope they make the right decision. Our households have to make these decisions every day, why can't our government?