Arnold Kling  

"Fiscal Responsibility First"?

PRINT
Median Voter to Self: Keep Up ... Today's Prize Winner for Overc...

According to the Washington Post (editorial page), this is future President Hillary Clinton on Social Security:


"I'm not putting anything on the proverbial table until we move toward fiscal responsibility," she said during Wednesday's debate

I really have not been following the campaign, but I saw on Greg Mankiw's blog that she proposed some sort of "baby bond" that is yet another unfunded liability.

I have this quaint definition of fiscal responsibility as anything that reduces government liabilities to bring them into line with realistic expectations of tax revenues. The future President's definition of fiscal responsibility appears to be that long-term liabilities of the government do not matter at all. If a corporate president were to defiantly announce that he planned to do nothing about the corporation's long-term liabilities until the short-term profit picture improved, I do not think his company's stock would do very well.

I am not saying that future President Clinton's future defeated opponents are necessarily any less irresponsible. Or that the voters care. Or that Medicare's unfunded liability is not at least as big a third rail.

When I was about 6 years old, a neighbor challenged me to a fight. Not wanting to take him up, but not wanting to appear unmanly, I attempted to adopt a tough-guy sneer as I spat out, "What if I said I was chicken?"

"Fiscal responsibility first" sounds to me like chickening out with a tough-guy sneer.


Comments and Sharing


CATEGORIES: Fiscal Policy



COMMENTS (10 to date)
General Specific writes:

Your language seems misleadling. To say that Medicare is "not at least as big a third rail" makes it sound like the problems with Social Security and Medicare are comparable. They aren't.

True, they are both third rails. But there problems are significantly different.

Social Security has minor problems with funding that can easily be addressed, combined with a major problem that the government is currently borrowing the surplus--and then some--in order to operate (as well as to fund an unnecessary and innept war in Iraq).

The Govt has a fiscal problem that affects the future of Social Security--since taxes will have to rise dramatically to pay back all the money the government has borrowed from it.

Medicare, on the other hand, is a trainwreck.

Calling them both third rails is understandable in a political sense, but I think Clinton is right that Social Security is largely a fiscal issue.

Matt writes:

I agree all the way with Arnold here, and I vented on this at Brad's blog.

Hillary was there, what?, 13 years ago for the last social security update. If she knows anything at all, it is how ofen that program is updated, not nearly enough in my estimation.

Ajay writes:

I don't think her statement means anything at all. If you look more broadly at what Clinton says, her entire scam is just to deflect, deflect, deflect. Try to say nothing and make people think she's a centrist. This particular statement falls in perfectly with that plan as she refuses to say anything of substance but is vaguely for fiscal responsibility. Only a guess but I suspect it will mean she will be for raising taxes across the board, income and SS, if she takes office but she knows that's politically unpopular so she makes an extremely veiled reference to it now. Anyway, I consider her nomination a longshot, as even the Democrats are not stupid enough to nominate her. Remember, Dean was far ahead in the polls going into Iowa. I'm not sure who will come out of the Democratic side but I think they know she's not electable and will be defeated in a landslide. However, even knowing that, I don't want her nominated as she's a horrible candidate.

ed writes:

Why does "fiscal responsibility" have to be only about cutting spending...can't it be about raising taxes as well? I suspect Hillary would want to raise taxes somehow, although it's easy to understand why she doesn't emphasize this point.

Don Lloyd writes:

General Specific,

The Govt has a fiscal problem that affects the future of Social Security--since taxes will have to rise dramatically to pay back all the money the government has borrowed from it.

Not at all. All that matters is the year by year SS income and outgo. Whether new borrowing or new taxes are required has nothing to do with previous borrowings recorded in the SS 'Trust Fund'. It is no more difficult (nor any less difficult) to make up shortfalls directly than it is to redeem pseudo-bonds.

Regards, Don

General Specific writes:

Don: I don't agree. SS has a surplus and that surplus is used right now to reduce other forms of tax (hiding the true level of the deficit). If the government balanced its books right now on the fiscal side(not intermingling social security), then the SS surplus would have to be invested elsewhere (not in govt bonds).

Future tax rates would not have to rise in order to pay for those bond redemptions. The redemptions would be made elsewhere, e.g. from the market and/or private debt.

SS doesn't have a problem. The only problem it has, by and large, is that income taxes (including capital gains) or nowhere sufficient to pay for government operating expenses, including the war in iraq.

8 writes:

$5,000 at 8% for 70 years becomes $1 million dollars. Looks like a SS replacement program to me.

randy writes:
If a corporate president were to defiantly announce that he planned to do nothing about the corporation's long-term liabilities until the short-term profit picture improved

isn't this exactly what the mortgage companies were doing all along?

Floccina writes:

Don't worry she is only lying.

General Specific writes:

Re: "If a corporate president were to defiantly announce that he planned to do nothing about the corporation's long-term liabilities until the short-term profit picture improved"

If a company is hemorrhaging cash, the shareholders will demand that the CEO address that issue. A CEO who says he's too busy looking at long-term issues to address immediate failures is often called a "former CEO."

Comments for this entry have been closed
Return to top