Monday, 28 March 2011

Unsustainable budget threatens nation .....

or so say 10 ex-chairs of the President's Council of Economic Advisers. In an open letter Martin N. Baily, Martin S. Feldstein, R. Glenn Hubbard, Edward P. Lazear, N. Gregory Mankiw, Christina D. Romer, Harvey S. Rosen, Charles L. Schultze, Laura D. Tyson and Murray L. Weidenbaum argue for prompt action on the long-run federal budget deficit.
There are many issues on which we don’t agree. Yet we find ourselves in remarkable unanimity about the long-run federal budget deficit: It is a severe threat that calls for serious and prompt attention.

While the actual deficit is likely to shrink over the next few years as the economy continues to recover, the aging of the baby-boom generation and rapidly rising health care costs are likely to create a large and growing gap between spending and revenues. These deficits will take a toll on private investment and economic growth. At some point, bond markets are likely to turn on the United States — leading to a crisis that could dwarf 2008.
Of the 10, 4 served under Democratic and 6 under Republican presidents: one worked under Carter, two worked under Reagan, two worked under Clinton, four worked under Bush, and one worked under Obama.

Arnold Kling noted,
Of course, it was another former Clinton economic adviser, Alan Blinder, who once wrote that when economists are most in agreement they are least likely to be listened to.
As is normal, politics will I'm sure win out over economics, even in a situation as serious as this.

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