The fiscal gap — the difference between our government’s projected financial obligations and the present value of all projected future tax and other receipts — is, effectively, our nation’s credit card bill. Eliminating it, would require an immediate, permanent 59 percent increase in federal tax revenue. An immediate, permanent 38 percent cut in federal spending would also suffice. The longer we wait, the worse the pain. If, for example, we do nothing for 20 years, the requisite federal tax increase would be 70 percent, or the requisite spending cut, 43 percent. Even if we do nothing — which, given Washington, is the likeliest outcome these days — we should at least be transparent about our insolvency. A bill introduced last year by the Democratic senators Tim Kaine of Virginia and Chris Coons of Delaware and the Republican senators Rob Portman of Ohio and John Thune of South Dakota would require the Congressional Budget Office, the Government Accountability Office and the Office of Management and Budget to conduct such “generational accounting.”I have no problem with a well informed version of generational accounting but I do share the concern expressed by Dean Baker that Kotlikoff’s habit of ginning up very big numbers tends to scare more than it informs. Paul Krugman echoes Dean’s wisdom here. The day after this exchange over long-term budget forecasting, Kotlikoff offers Krugman this advice:
I think public intellectuals, like Paul Krugman, have a responsibility to act like grownups in speaking with the public. If they start calling people with different views “stupid,” they demean themselves and convey the message that name calling rather than respectful debate is appropriate conduct. It certainly is not … But what I’m writing about is not Paul Ryan. I’m writing about the level of national discourse. No one, and I mean no one, deserves to be called stupid.Brad DeLong has already pointed out that Krugman did not call Congressman Ryan stupid. What Paul was really saying is that the Republican fiscal policy wonk was a con artist:
all the alleged fiscal responsibility lay not in the much-hyped changes to Medicare, but in magic asterisks claiming huge but unspecified savings from discretionary spending and huge but unspecified revenue gains from closing loopholes he refused to name.Ryan has often called for large reductions in taxes on the well to do. Kotlikoff on the other hand frets that we are not raising enough in taxes to pay for all the things that the government has promised. And yet Kotlikoff wants us to be nice to politicians like Paul Ryan who are not being honest with us. I’m speechless.