Paul Krugman: Fight the Future

Why are we so worried about highly uncertain budget projections extending decades into the future when we have very real problems such as high levels of unemployment that need our immediate attention?

Fight the Future, by Paul Krugman, Commentary, NY Times: Last week the International Monetary Fund, whose normal role is that of stern disciplinarian to spendthrift governments,... argued that the sequester and other forms of fiscal contraction will cut this year’s U.S. growth rate by almost half, undermining what might otherwise have been a fairly vigorous recovery. And these spending cuts are both unwise and unnecessary.

Unfortunately, the fund apparently couldn’t bring itself to break completely with the austerity talk that is regarded as a badge of seriousness in the policy world. Even while urging us to run bigger deficits for the time being, Christine Lagarde, the fund’s head, called on us to “hurry up with putting in place a medium-term road map to restore long-run fiscal sustainability.”

So here’s my question: Why, exactly, do we need to hurry up? Is it urgent that we agree now on how we’ll deal with fiscal issues of the 2020s, the 2030s and beyond?

No, it isn’t. And in practice, focusing on “long-run fiscal sustainability” — which usually ends up being mainly about “entitlement reform,” a k a cuts to Social Security and other programs — isn’t a way of being responsible. On the contrary, it’s an excuse, a way to avoid dealing with the severe economic problems we face right now.

What’s the problem with focusing on the long run? Part of the answer ... is that the distant future is highly uncertain (surprise!)... In particular, projections of huge future deficits are to a large extent based on the assumption that health care costs will continue to rise substantially faster than national income — yet the growth in health costs has slowed dramatically in the last few years, and the long-run picture is already looking much less dire...

When will we be ready for a long-run fiscal deal? My answer is, once voters have spoken decisively in favor of one or the other of the rival visions driving our current political polarization. Maybe President Hillary Clinton, fresh off her upset victory in the 2018 midterms, will be able to broker a long-run budget compromise with chastened Republicans; or maybe demoralized Democrats will sign on to President Paul Ryan’s plan to privatize Medicare. Either way, the time for big decisions about the long run is not yet.

And because that time is not yet, influential people need to stop using the future as an excuse for inaction. The clear and present danger is mass unemployment, and we should deal with it, now.