So I never really read or listened to much that Mickey Kaus. The honest reason why,is the prejudice I had against him for his immigration position. Hopefully I can learn from the this because his recent Bloggingheads with Bob Wright gives some of the clearest eyed economic and fiscal analysis I have heard.
Kaus makes several important points
- Its entirely feasible, and from his point of view desirable, that health care spending increase to 60% of GDP. I do not think this is desirable. At this point I think it would be desirable if health care shrank as a portion of GDP. However, as far as I can tell it is simply not accurate to say that the current path is unsustainable. It looks entirely sustainable to me. Undesirable but completely sustainable.
- Both the Ryan Plan and the Obama Plan rely heavily on the fiction that the government in 2011 has the power to cut health care spending in 2040. Committing future Governments to do things that they have no interest in doing is not realistic.
- Using the current crisis to cut spending in non-entitlement programs is completely consistent with Progressive strategy to make room for entitlements. I think Yglesias makes this point as well.
- Obama’s tendency to preemptively concede also makes sense in this context. Kaus calls Obama’s style Rope-A-Dope, I call it Fabianism, but these are essentially the same strategy.
- Its much easier to raise taxes than to cut spending. If push comes to shove, which it will eventually, one should basically just assume that taxes will rise. While its conceivable that total spending would go down in the future, the world has to change is some weird way for the future not to involve significant tax increases.
I don’t know if Kaus takes this position directly but a corollary is that the US governments ability to borrow abroad at incredibility low interest rates is essentially a way for it to finance tax cuts for wealthy Americans. I don’t say this in a sneering way. It just seems to me to be the case.
Moreover, the fact that the US earns a profit from its international position is likely supported in part by this relationship. The US government borrows cheaply from abroad. It uses that money to finance tax cuts for wealthy Americans. Those wealthy Americans use some of that extra income to invest in multinational companies, which then return huge profits to the United States.
On net the United States is richer for having done this. Though, I suspect that its has suppressed the wages for working class Americans.
2 comments
Comments feed for this article
Tuesday ~ April 19th, 2011 at 1:55 pm
IVV
I think the real question is how you define “The United States.” The federal government borrows from abroad because of a limited claim on wealthy Americans. Wealthy Americans invest more in multinationals. Multinationals turn greater profits… but it doesn’t go back to the federal government, and the profits are again claimed by wealthy Americans. Average Americans gain little and lose little from this environment. So, The United States, consisting of average Americans, wealthy Americans, the federal government, and some portion of multinationals, does well by this arrangement–it may even be pareto optimal. However, the one group that captures the most value from this relationship is clearly the wealthy Americans (note that in this case, neither the federal government nor the multinationals count; neither are actually people, and neither have true feelings).
But it makes me wonder: what should you do if you discover that what you want for yourself (or ideologically) is not pareto optimal?
Tuesday ~ April 19th, 2011 at 3:14 pm
Lord
It makes a lot of difference which taxes are raised though. Higher taxes on healthcare could be very productive under these circumstances. While these policies benefit the wealthy and their reversal may harm them, those profits don’t accrue to the US, only the debt, so the country is probably worse off.