Arnold Kling  

Our Fiscal Future

Population, Aging, and the Sav... Scientific Consensus or Religi...

Greg Mankiw writes,

Economist Glenn Hubbard...reminds us that unless we see significant entitlement reform, taxes are heading higher...

There is nothing very new here, but it is good to have Glenn saying it anyway.

The history here is that Democrats and Republicans have fought over the solution to pending fiscal deficits. The Democrats have said "yes" to raising taxes and "no" to reforming entitlements. Republicans have said "yes" to reforming entitlements and "no" to raising taxes. The net result has been "no" to both, and hence no resolution. Many responsible economists have said "yes" to both, and now Hubbard appears to be shifting from the Republican side to the responsible economist side.

I recommend checking Greg's blog daily, particularly if you are a student or teacher of undergraduate economics.

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CATEGORIES: Fiscal Policy

COMMENTS (5 to date)
T.R. Elliott writes:

If the republicans planned to "reform" entitlements the way they "reformed" medicare, the democrats were smart to say no.

Taxes will go up because you can't get something for nothing. People have a hard time with that concept. Basic physics. Law of the universe. Somebody, in the future, must pay for the spending that is not covered by taxes today. All arguments about growth and inflation are moot. The future still pays for the spending today.

The only caveat: default. The US could default on foreign holders of debt. Then everyone pays: big time.

Taxes are going up. The longer we wait, the more they go up.

Patrick writes:

I can believe that taxes are going up, but I also believe that entitlement spending is going down (or not rising as fast as projected, which is enough). Everyone says it can't happen, but it has happened in other countries. The political impasse can be broken. All it takes is a crisis, and we're going to get one.

The best example is Sweden in the early '90s, when government spending was cut by a staggering 15% of GDP. Reform does happen . . . once all other options are exhausted.

Lord writes:

Yes, taxes will go up as they must to provide for a larger portion of the elderly. Cutting meager retirement benefits makes ever less sense as companies shed their pensions. Spending will go up, but not by as much as projected because healthcare will eventually be reformed when costs meet reality.

Silas Barta writes:

Taxes will go up because you can't get something for nothing. People have a hard time with that concept. Basic physics. Law of the universe.

No, T. R. Elliot, that's an economic law, and as you have stated before, all present economics is pseudoscience and can't be trusted. But then, that was one of your posts, so I guess I wasn't really supposed to take it seriously. But still, it was your post.

knzn writes:

The Democrats didn’t really say “no” to reforming entitlements; they just insisted on a condition of “no privatization”. Whether or not it’s a good idea, privatization is not an indispensable element of entitlement reform. On the other hand, being the minority party in Congress, perhaps the Democrats should have been more willing to compromise.

Then again, being the majority party in Congress, the Republicans in theory didn’t really need the Democrats. In the end, apparently, a lot of Republicans couldn’t quite say “yes” to Social Security reform. And neither side has seriously discussed Medicare reform yet.

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