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Biotech / Medical : 2012 Biotech Charity Contest
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To: Steve Lokness who wrote (318)6/26/2012 11:38:50 PM
From: Biomaven6 Recommendations  Read Replies (2) of 513
 
I think there are two very different issues here - what the best thing to do in the short term is, and what needs to be done in the longer term.

First the long term, because that's perhaps less controversial. Given the demographics, it's pretty clear to me that both entitlements need to be modestly cut and taxes need to be modestly raised. This doesn't have to be done quickly - it can be phased in over say two decades. I'm not saying this will be politically easy to do, but that doesn't make it any less necessary. We also need state and local pension reform.

The short term is trickier. The UK is an example of country which has gone the "cut deficits now" route, and the results have not been particularly pretty. The hard fact is that the easiest way to raise revenue is to grow the economy, and it's hard to grow the economy while simultaneously cutting spending.

The US right now has the ability to borrow for virtually nothing. So to my mind the short-term deficit is not of particular concern. Inflation is not an issue either - indeed we are flirting with deflation. So my prescription would be increased spending on infrastructure - for example subsidies for the development of natural gas infrastructure for transportation and home heating in the Eastern US where many homes still heat with oil. The Fed also needs to be a bit more expansionary given that Europe will be a drag and there is little prospect of anything but legislative deadlock in the US.

Peter
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