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Home Publications Blogs Beat the Press Halloween Might Be Over, but the Deficit Hawks Are Still Trying to Scare People

Halloween Might Be Over, but the Deficit Hawks Are Still Trying to Scare People

Wednesday, 28 November 2012 17:24

It seems that many people have been bothered by a Wall Street Journal column co-authored by Chris Cox and Bill Archer, the former Chair of the House Ways and Means Committee. The column warns of an $86 trillion dollar deficit if we propoerly account for the liabilities of Social Security, Medicare and other government obligations. That's scary.

Fortunately, we have been around the block with this argument before. If we go to the CEPR's oldies section we find this 2003 classic on the $44 trillion deficit scare. The story's the same, even if the numbers have been changed somewhat.

Comments (7)Add Comment
in addition to fixing its bloated and irrational profit driven health care system
written by Joe Emersberger, November 28, 2012 6:32
What happens if the USA brings its military budget down to what the UK spends every year as a share of GDP (2.5% instead of nearly 5%)? That's hundreds of billions per year in savings while still maintaining spending that is - relative to the size of the US economy - what other rich countries spend. In fact, 2.5% of GDP isn't even too far off the post WWII low for US military spending relative to GDP which was (I recall) 3% of GDP just prior to 9/11.
written by jerry, November 28, 2012 7:45
I heard that if you project the numbers into the fourth millenium, the deficit will be 100 quadrillion! AHHH!!
written by Ted Boettner, November 29, 2012 7:06
This may be stupid, but is there a reason we never talk about the federal government's "assets" when talking about its liabilities. I imagine they are well into the hundreds of trillions. Any why do we apply business accounting standards to governments that for the most part are clearly never going to disappear or file bankruptcy. Business do not have the power to tax.
Giving the OMG Class New Life
written by Last Mover, November 29, 2012 7:59
This message is critical for the OMG Class, those in the 99% and 47% who forgot about the debt crisis and kept taking and taking without ever looking around to digest the economic consequences.

The 1% 'ers have decided to save those below them on whom the trickle falls with an OMG message delivered and repeated ad nauseum.

Now hear this. If you're not already dead economically you soon will be by your own hand of selfish entitlement interests. Forget about the lack of a job. Forget about falling real wages even if you have a job. Forget about education and upward mobility. Forget about the retirement and health care already paid for. Forget about unpaid bills.

Repeat after us: OMG! OMG! OMG! Like the debt is killing us! Like run for your economic life into the hands of those willing to save you now from economic doom! Like now!
transfers are not costly
written by pete, November 29, 2012 9:21
Dean, once in a while but not always you point out that most of the future deficits/debt are simply economic transfers....borrowing money from the economy or taxing, whichever (i.e., tax now or later or print), to pay money back to the economy. Thus, there is no drain on the economy, as there certainly is when we fight foolish wars or build high speed trains in the middle of the central valley in California. Now, obviously, the foreign ownership of the debt is an issue to consider, but this is currently a tiny part of the debt, and can be solved as you point out by proper currency manipulation.

Finally, all economists would (should) agree that the supply of public goods and optimal taxation should be considered independently, instead of linking them as with SS or highway taxes. Tax bad things, and provide public goods as needed. It is way inefficient to try and link the two, like medicare and social security payroll taxes and medicare and social security payments (assuming these can be shown to be public goods). A $5 per gallon tax on gasoline, which is apparently a bad, would likely solve all old age insurance and medical cost issues, allowing a huge reduction in income and payroll taxes.

written by liberal, November 29, 2012 12:41
pete wrote,
Finally, all economists would (should) agree that the supply of public goods and optimal taxation should be considered independently, instead of linking them as with SS or highway taxes.

But SS and Medicare aren't public goods in the strict sense. While there may be good reasons not to have a particular tax devoted to them, "they're public goods" isn't one of them.

Tax bad things, ...

"Pigouvian" externalities are not the only proper object of taxation. Economic rents are also proper objects of taxation.
I agree, but aren't rents bad....(at least monopoly ones)
written by pete, November 29, 2012 1:39
Hard to catch one....example might be land, as Henry George pointed out. Perhaps even life itself, so that the head tax as part of Obamacare is reasonable. Could say that auctioning federal mineral rights is monetizing a rent.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.