LAWRENCE SUMMERS published an article recently in the
Financial Times asserting that U.S. federal spending will
continue to grow both in real terms and as a share of the economy
regardless of whether Barack Obama or Mitt Romney is elected in
November. As one of the nation’s eminent economists and a former
Treasury Secretary, Mr. Summers is someone whose judgments deserve
careful attention. Readers may safely assume that his article
reflects high-level thinking in Democratic circles in Washington.
Nevertheless, his case is flawed on several counts.
Mr. Summers is certainly correct on one point: Pressure for more spending will continue to grow over the next decade. Baby Boomers are beginning to retire in large numbers, putting increased strain on Social Security and Medicare. Interest costs on public debt are certain to rise as a share of federal spending and GDP. The costs of goods and services purchased by government in health and education will grow more rapidly than those purchased in the private sector. At the same time, governments at all levels are running out of short-term gimmicks to cover or disguise their spending. Mr. Summers argues the problems are such that spending will grow and taxes will increase no matter which party controls the government.
In fact, the likely outcome is very nearly the reverse: Spending will have to be cut, and cut drastically from current trend lines. That is a near certainty. But when we will begin to address our spending problems is a vital question. The longer we wait, the deeper the fiscal hole we will dig for ourselves. On this point, it will matter a great deal which party wins this election.
Read more: http://spectator.org/archives/2012/10/03/understating-the-budget-crisis
Mr. Summers is certainly correct on one point: Pressure for more spending will continue to grow over the next decade. Baby Boomers are beginning to retire in large numbers, putting increased strain on Social Security and Medicare. Interest costs on public debt are certain to rise as a share of federal spending and GDP. The costs of goods and services purchased by government in health and education will grow more rapidly than those purchased in the private sector. At the same time, governments at all levels are running out of short-term gimmicks to cover or disguise their spending. Mr. Summers argues the problems are such that spending will grow and taxes will increase no matter which party controls the government.
In fact, the likely outcome is very nearly the reverse: Spending will have to be cut, and cut drastically from current trend lines. That is a near certainty. But when we will begin to address our spending problems is a vital question. The longer we wait, the deeper the fiscal hole we will dig for ourselves. On this point, it will matter a great deal which party wins this election.
Read more: http://spectator.org/archives/2012/10/03/understating-the-budget-crisis
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