My Turn: Budget ‘experts’ are out of touch
The Monitor’s April 23 article on the experts who met at the UNH School of Law to discuss the federal budget deficit reveals how out of touch these “high-powered” past and present officials, including Sen. Kelly Ayotte, can be.
The message from these luminaries seems to be, as David Walker, former comptroller general, put it: “We must change course. Government has grown too big, promised to do too much and needs to restructure.” According to Walker, as paraphrased by the Monitor, our goal should be to “bring a key measure, the ratio of public debt to the nation’s gross domestic product (GDP), down to a sustainable level.”
The rationale for this assertion likely comes from a 2010 paper by two Harvard economists, Carmen Reinhart and Kenneth Rogoff, which claimed to show that when a country’s ratio of debt to GDP exceeds 90 percent, its economic growth slows considerably. Advocates of reduced government spending and austerity have pointed to this paper as justification for their position.
Walker and those who think like him are behind the times. As far back as 2010, Paul Krugman and others raised questions about the Harvard authors’ use and interpretation of data. A recent paper by economists at the University of Massachusetts-Amherst found serious errors in the Reinhart-Rogoff analysis. In a New York Times column Reinhart and Rogoff acknowledged that “causality” runs both ways (in other words, high levels of debt can cause slow economic growth).
Walker and the other participants in this discussion also seem to have ignored a larger issue, namely that, as the chief economist for Goldman Sachs and others have noted, due to higher tax rates, less spending, and an improved economy, the deficit is “shrinking rapidly,” not growing. This doesn’t mean that we will never have to worry about the deficit, only that we don’t need to do so now. The real crisis we face now is unemployment, and to address this, we will have to increase spending, not reduce it.
In this light, it is difficult to understand why the panelists advocate cutting Social Security and Medicare as a solution to our economic problems. By law, Social Security cannot borrow, and it cannot add to the deficit. Social Security spending is projected to increase from 4.9 percent of GDP in 2012 to 6.4 percent in 2035, but this is not an insurmountable problem.
Medicare is a more difficult problem, but it must be viewed in terms of the larger challenges facing our health care system. In fact, for decades, Medicare has had a better record controlling costs than private insurers. Medicare spending now is growing at a historically low rate, and the Congressional Budget Office has revised downward its previous estimate of Medicare spending between now and 2022. Although the retirement of the baby boomers poses a challenge to Medicare, the implementation of the Affordable Care Act and other changes could finally put us on the path to restraining health care inflation.
Almost two-thirds of Social Security beneficiaries rely on the program for more than half their income, and half of Medicare beneficiaries had incomes under $22,000 in 2010.
Walker and the other panelists have misunderstood the real issues we face. They are not the voices we should be listening to at this critical time in our history.
(Stephen Gorin is a professor in the Social Work Department at Plymouth State University and executive director of the New Hampshire chapter of the National Association of Social Workers.)