A quick reminder, because this will take some persistence, that means testing is a marginal tax increase. Adjusting to a new chained CPI measure will also in many cases be marginal a tax increase – both through the tax code and the spending code.
However, in this iteration of my infinite part series I am going to pivot off of something Yglesias said that echoes a long standing position of mine:
There is no present-day economic problem that can be laid at the feet of high current levels of federal spending. So let’s not sweat the 2020s. Maybe we’ll invent some super-useful but expensive technology that merits giant spending. Who knows? Most likely, voters will continue to demand certain kinds of public services and that will cost money. One such service is health care. Systematic reform of the exceptionally high cost structure of American health care would, fairly reliably, lead to a lower level of future spending. Just saying “cross my heart / hope to die / stick a needle in my eye / public sector health care spending will be lower” doesn’t achieve much of anything.
Future problem necessarily exist in the future. And, because of adding up constraints, solutions to future problems often exist only in the future as well.
For example, the solution to not spending a lot of money on Medicare in 2035 is more or less to not spend a lot of money on Medicaid in 2035. Unfortunately for those worried about the problem, it is currently 2011. So there isn’t a lot you can really do about it.
More completely, part of the reason you can’t do anything about this is that Medicare spending doesn’t simply come out of the ether. Its not like we could be spending $100 Billion but we are just flippantly choosing to spend $600 Billion. There are social demands, political constraints, technological opportunities and obstacles and ultimately an equilibrium that emerges from the political process.
In 2035 there will be similar forces and they too will produce some equilibrium. Trying to understand that equilibrium is hard enough, trying to control it strikes me as a bit silly.
My best guess at this point is that the equilibrium in 2035 will be like that in 2011 only more so. That is to say, the desire to spend on entitlements will trump the desire to hold down marginal tax rates and concerns about the deficit will to bring the two in line. The result will be higher taxes.
I say this not to argue in favor of it but simply to say that this looks like the inevitable outcome. Right now I don’t see how a radically different equilibrium emerges.