In the entry on structural and cyclical deficits on the Business site, a commenter says:
Megan opens with "Liberals are focusing on the cyclical deficit, which is not a big problem. Conservatives are talking about the structural deficit, which is a huge problem." She then contradicts herself when she cites Paul Krugman while discussing the structural deficit: "it
isn't true that the structural deficit is not a problem if we just leave it alone. Paul Krugman and others have been posting graphs like this one:"
And this bizarre observation: our structural deficits can be blamed on LBJ and FDR??? I assume that's because they created Social Security and Medicare. That's a bold statement to make, given that the cause of our structural deficit is complex. Even before breaking the surface, one must recognize that deficits are not caused by spending alone, they are caused by revenues that are lower than spending. Hence, one could just as easily blame Ronal Reagan for the structural deficit because he reduced revenues (while substantially increasing defense spending).Megan has written some insightful posts before. Unfortunately, this is not one of them. My advice: steer clear of the political hackery and focus on the data.
First, I take Paul Krugman to be mostly writing about the cyclical deficit; he is worried that we will not do enough, now, to stimulate employment.
On the broader point, several things: First, Medicare and Social Security are, simply unquestionably, the runaway problems with our budget. You could zero out the defense budget, and it wouldn't pay for a year of Social Security by 2014. Second, Medicare and Social Security nominally come attached to a source of revenue, which starting this decade will be insufficient to cover their outflow.
As to who is "at fault", I agree that at some level this is a silly exercise; every past president since at least FDR has a hand in the current budget picture. But on the specific charge, I don't think you can blame Reagan, since the marginal rate cuts were undone by the end of the Clinton Administration. The simplifying and base-broadening measures, and the lower capital taxes, remained, but on net these are good for the budget. You'd have a better case against Bush II, but the deficit projections actually assume that all of his tax cuts expire next year, at which point they revert to Clinton levels. If the Democrats vote to extend them, I think you have to hold the Democrats responsible for the result. You can blame Bush for an increase in net interest on the debt, but this is a small factor in the overall budget picture.
On the spending side, I wasn't trying to single out FDR and LBJ for blame; rather, I was trying to point out that the deficit is not Obama's "fault"--at least not in the way that most Republican and conservative critics are using the term. The growth in these two programs would be driving the structural deficit wider even if Obama hadn't done any new spending, and so far at least, they are the primary problem, not any spending Obama has done. The idea that entitlements, particularly Medicare, are the major culprit behind some major fiscal issues coming down the pike is hardly a partisan one.
Should we raise taxes to cover the shortfall? I think we're going to have to; there is no political consensus for the kind of deep cuts we would have to make in order to manage things by cutting spending. I've angered a number of conservatives by arguing that the era of tax cuts is over, and Republicans need a new message. But by 2019, the problems are not due to a change in the revenue side; they're due to a change in the spending side. That doesn't tell you anything about what the solution should be, of course.
We want to hear what you think about this article. Submit a letter to the editor or write to email@example.com.