And here are four things we know about our debt. We know that government borrowing rates are low. We know that global appetite for our debt is high. We know we borrow in our own currency, and not, like Europe, in a common currency that we don't control. And we know that makes us less vulnerable (but not invincible) from a debt crisis.
Out of these ten things we know, how many of them suggest that we should cut our deficits today? Basically, zero. And that's Paul Krugman's point. Everything we know about the economy today provides a clear argument for elevated deficits.
WHAT WE DON'T KNOW
Joe Scarborough understands this. He says he wants higher deficits and a game-plan for cutting our long-term debt (which is the accumulation of our deficits). But he doesn't fully understand -- or properly communicate -- how the argument for long-term debt reduction rests on assumptions about the future that are exquisitely sensitive to change. The precise dimensions of our 2020 debt are calculated from a matrix of variables (e.g. immigration, productivity growth, hospital construction growth, MRI inflation rates) whose very nature is to fluctuate, sometimes dramatically, on a quarterly or annual basis.
Here are four things we think we know about
our future debt -- which is almost entirely a health care spending problem. We think we know that the cost of caring for Americans will continue to grow faster than the economy. We think we know that demand for this increasingly expensive care will grow along with our aging boomer population. We think we know that tax revenue will grow about in line with the economy. Thus, we think we know what the gap between future taxes and future spending will be, and how much we have to start saving today to cover it.
It's possible that the deficit hawks have it 100 percent right. But it would also take a rather astonishing clairvoyance for anybody to foresee the next ten years with even slightly useful clarity. Scarborough and Mika Brzezinski often talk about "math" when they talk about debt ...
... and our debt projections look like math, what with all of those numbers. But math is a
law. Actuarial projections are not. They are smart guesswork facilitated by multiplying current trends over many years. There's an important difference.*
For example, what if health care inflation slows down?
Actually, that's not a "what-if." Two weeks ago, CBO revealed
that health care spending has "grown much more slowly than historical
rates would have predicted." It cut estimates of federal spending on
Medicaid and Medicare in 2020 by "about $200 billion." That's a lot of
money. It is much more than Washington would save by
raising the Medicare eligibility age from 65 to 67. If you thought
raising the retirement age was enough to calm the market's appetite for
debt reduction, then guess what? We just got those 2X those savings by doing nothing.