Saturday, September 20, 2003

The good news is I'm not alone... The bad news is I may be right. Apparently I am not the only one who feels something potentially catastrophic is on the horizon. And what's more distressing is that someone who knows way more than I do is in accord with that feeling I have in my gut. I read this interview with Paul Krugman on Calpundit (BMA highlighted comments relevant to previous post and labeled who said what for readability):

[snip]Paul Krugman:....obviously Grover Norquist and the Heritage Foundation see all this as a way to radically downsize government by creating so much red ink that it becomes politically possible to chip away at Social Security and Medicare. I doubt that Bush understands that that's where it's going, but in effect he's allowing himself to be used by people who have those sorts of goals.

CalPundit: And they honestly think they can do that? I don't think politically you can cut those programs.

PK: Train wreck is a way overused metaphor, but we're headed for some kind of collision, and there are three things that can happen. Just by the arithmetic, you can either have (1)big tax increases, roll back the whole Bush program plus some; or you can (2)sharply cut Medicare and Social Security, because that's where the money is; or (3)the U.S. just tootles along until we actually have a financial crisis where the marginal buyer of U.S. treasury bills, which is actually the Reserve Bank of China, says, we don't trust these guys anymore — and we turn into Argentina. All three of those are clearly impossible, and yet one of them has to happen, so, your choice. Which one?

CalPundit: Well, how about your choice? What's your best guess?

PK: I think financial crisis, and then how it falls out is 50-50, either New New Deal or back to McKinley, and I think it's anybody's guess which one of those it is. It's crazy stuff, but think about where I am on this. My take on the numbers is no different from Brad DeLong's, it's no different from CBO's now, and we all look at this and we all see this curve that marches steadily upwards and then heads for the sky after the baby boomers start retiring. I don't know what Brad thinks, I think he's open-minded [actually, it turns out he's optimistic that voters will eventually come to their senses and raise taxes on the rich. —ed.], but the general view is: yes, but this is America, it can't happen, so something will come up. And I'm just willing to say I don't see any noncatastrophic solution to this, I don't see an incremental stepwise resolution. I think something drastic is really going to happen.


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