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Politics : Mainstream Politics and Economics -- Ignore unavailable to you. Want to Upgrade?

To: Wharf Rat who wrote (24213)	8/20/2012 1:32:14 PM
From: TimF	Respond to of 85487

"since the spending is on a long term (mufti-generation) downturn as a percentage of the economy" So is healthcare. No, healthcare is on a long term uptick as a percentage of the economy and esp. of federal spending. Exactly the opposite of defense. Your link doesn't really cover the long term, and is about the increase slowing, not reversing. It makes sense that it would slow, it couldn't keep growing at the rate it was growing forever. It can't, even theoretically, get over 100%, and the practical limit is far below that. Defense spending, being a small fraction of the GDP that medical spending is, isn't near such hard limits. It could in theory grow more rapidly then the economy for a long time. (Not that I'd want it to do that.) But the long-term deficit projections are so dire primarily because we assume that benefits will continue to be paid in full even after the Medicare and Social Security trust funds are exhausted. If no benefits beyond incoming revenue can be paid after the trust funds are exhausted, then the fiscal outlook really isn’t untenable. Not as untenable, but 1 - There will be a huge push to increase taxing and borrowing, but people who don't want their benefits cut. That's esp. true if its an actual cut (not a reduction in the rate of growth that typically gets called a "cut"), and a dramatic one, that would result from the nominal trust funds exhausting their balance. 2 - Even with such a cut off, debt will grow too much. 3 - The fiscal problem isn't just too large of deficits, and too much debt, its too much federal spending. The government is not legally allowed to issue any debt above the statutory limit, so Blahous should have assumed the deficit would disappear when we reach that limit at or around the beginning of next year. The debt limit has never restrained government. Its more a fiction than reality, any time it gets reached it gets raised.