Friday, October 10, 2003

It's the Spending, Stupid
Samuelson writes about the federal budget deficits. The diagnosis:

But the biggest misconception about deficits is that, by themselves, they threaten the economy's long-term vitality. Not true. The real threat is rising government spending. The reason is simple. Government spending must be paid for by either taxes or borrowing (a deficit). If spending rises too high, economic growth may suffer from either steeper taxes or heftier deficits. Spending is the real culprit.

And the solution:
The way to avoid the death trap is to minimize future spending increases. Some needed steps are obvious. Congress should gradually raise the eligibility ages for Social Security and Medicare to 69 or 70; make benefits less generous for the well-off elderly; fully tax all Social Security benefits; and eliminate unneeded or wasteful federal programs -- from Amtrak to farm subsidies. Even these steps would not likely reduce federal spending as a share of GDP. They would simply limit the increase. Such are the pressures of an aging society.

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