Mar 07, 2011 5:35 PM GMT
We are fooling ourselves most of all. United States government debt in public hands is now more than $9 trillion, but most people still don’t realize what it will take to pay that off. [...]
Now that fiscal constraints are starting to bite, many politicians are afraid to reform or even to discuss changes in the largest problem areas: Medicare and Medicaid. Yes, some laudable cost controls on Medicare are embedded in the new health care law, but they’re not enough. Most likely, we will end up making other spending cuts that won’t solve our fiscal problems — and in areas that could instead benefit from Keynesian employment stimulus. These kinds of knee-jerk, poorly reasoned decisions are what happens when fiscal illusion reigns.
Fiscal austerity may sometimes sound like a dogmatic religion, but fixed principles often help us do the right thing, especially when temptation beckons. Professor Buchanan argued that the real choice was between a religion of budget balance and a rule of illusion. Seeking an optimal technocratic path is not on the menu.
SO, given this mess, what should be done?
As Matthew Yglesias from the Center for American Progress has proposed, President Obama could pledge to veto any budget that increases the projected medium-term deficit, relative to the status quo. He should include in that veto threat any deficit increases that arise from annual budgetary gimmicks like patches to the alternative minimum tax or the “doc fix” adjustment of Medicare reimbursement rates.
Such an announcement would not fix health care costs, but it would force us to recognize them, and would move us away from purely short-term planning. It would force the government to consider both spending cuts and tax increases.
In any case, the rigor of the numbers will soon sweep away the fiscal illusion. The only question is whether we will end the charade on our own terms or continue to play the fool.