page 132: "In the twentieth century, a totally different view of public debt emerged, based on the conviction that debt could serve as an instrument of policy aimed at raising public spending and redistributing wealth for the benefit of the least well-off members of society. The difference between these two views is fairly simple: in the nineteenth century, lender were handsomely reimbursed, thereby increasing private wealth; in the twentieth century, debt was drowned by inflation and repaid with money of decreasing value. In practice, this allowed deficits to be financed by those who had lent money to the state, and taxes did not have to be raised by an equivalent amount. This 'progressive' view of public debt retains its hold on many minds today, even though inflation has long since declined to a rate not much above the nineteenth century's...."
page 566: "Make no mistake: I have no particular liking for public debt. As I noted earlier, debt often becomes a backhanded form of redistribution of wealth from the poor to the rich, from people with modest savings to those with the means to lend to the government (who as a general rule ought to be paying taxes rather than lending). Since the middle of the twentieth century and the large-scale public debt repudiations (and debt shrinkage through inflation) after World War II, many dangerous illusions have arisen in regard to government debt and its relation to social redistribution. These illusions urgently need to be dispelled."
Clay Schluchter's insight:
There continues to be confusion about how to talk about debt. But no one argues that it's not a problem. It's usually a problem that weighs most heavily on the poor.
The gist of the argument against worrying over debt appears to go something like "We can borrow at fantastically low rates, and besides whatever we're buying won't go away. We'll only owe that money to ourselves." This argument is an oversimplification of what's really at issue. If we were only spending the money on investments, then we could hold those investments and sell them with interest. But federal investment is a surprisingly small amount of what's being spent.
Now maybe it's not hard to imagine that we could suddenly change that and dramatically increase investment for the future. But there's a good reason to think we probably won't. This is because what we're really planning on spending the money for is medical care.
The federal budget has long hovered around 20% GDP and has never really deviated strongly from that value. But we can see that medical care is projected to comprise the majority of that historically sufficient budget before I'm likely to retire. Add in 5% for Social Security, 5% for Defense and Interest and you quickly run out of room for any investment at all. We will most likely raise taxes to confront the changes we're facing, but that's probably not all that's required.
One thing that's required is that we all need to recognize that our belief that we are entitled to medical care does not match our commitment to pay for it. If you add up the typical lifetime contribution to Medicare and compare it to the typical benefit (after making all the corrections for inflation) it becomes obvious that benefits will eventually be cut.
Today's new retirees will draw 3x what they paid into the system. This difference is only expected to increase until it breaks the system.
This is a generational Ponzi scheme. Until we fix the financial health of the largest projected portion of our federal budget the debt will continue to represent a theft to me.
When we fix the problem we need to be faithful to the original concern that Medicare was designed to address. At the time it was said "There are more than 18 million Americans over the age of 65. Most of them have low incomes. Most of them are threatened by illness and medical expenses that they cannot afford."
The government needs to help insure against the health care cost of those who are least able to afford it. If there are cuts, or should I say when there are cuts, we should keep this in mind. It makes sense to raise taxes. But the problem doesn't get fixed until the average program revenue matches expenses - (or somehow manage much higher population growth indefinitely.)
Some economists have strong political leanings and use this issue (our debt) as a means to push their agenda. I don't have a problem with expanding our investment. (I just don't agree that this is the biggest concern we face.) Too often our political leaders seem to tolerate policies that are indefensibly immoral. Under the best circumstances it will be difficult to find resolution to climate change, pollution, religious extremism, guilt from ethnic privilege, etc. These sources of guilt are wounds that can are healed through an open an honest discussion and recognition of the conflicts of interest that are at stake.
I continue to be mystified by Medicare. The average lifetime payment from Medicare is 3X the inflation corrected revenue through taxes. Yet many believe they "deserve" this health coverage. The money has to come from somewhere.
I maintain that the only way to make this process make financial sense in the long term is through means testing. Over the past few decades we have been means testing some spending programs. It works. Why not reduce the Medicare coverage more strongly for people who have the means to cover themselves?
That ad is a reminder that while Republicans have spent the last four years attacking Obamacare for its tough tradeoffs and unpopular decisions, the moment they begin pushing a serious alternative, they'll suddenly have to deal with Democrats doing the same to them. And Democrats will be doing it from the higher ground of the post-Obamacare world: there will be millions and millions of people getting health insurance from the very program Republicans want to destroy, and every single one of them will be a possible story to use in an attack ad.
Here is one bit of many: The embedded papers by Louise Sheiner of Brookings, Chapin White of the Rand Corporation, and Thomas Getzen of Temple University are recommended. To be simplistic, there was agreement that much of the slowdown was […]
The New Year always brings many changes. In addition to soon to be broken resolutions, this particular year ushered in strict mandates requiring employers with more than 100 full-time employees to either provide health insurance to those employees or pay fines of between $2000 and $3,000. We’ve seen many firms publicly respond to this by cutting benefits to part-time workers.
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