A Fiscal Policy Day of Reckoning

Special Guests: Eugene Steurele

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This week on Facing the Future, we looked ahead to a “day of reckoning” that our guest, Eugene Steurele of the Urban Institute, says is coming for U.S. fiscal policy. We also got Gene’s take on why the budget is, and has been, transferring resources from America’s youth to richer, older generations.  Concord Coalition policy director Tori Gorman and chief economist Steve Robinson joined me for the conversation.

Steuerle is one of Washington’s most noted experts on the federal budget. He was deputy assistant secretary of the U.S. Department of the Treasury for Tax Analysis (1987–89), president of the National Tax Association (2001–02), co-director of the Urban-Brookings Tax Policy Center, and chair of the 1999 Technical Panel advising Social Security on its methods and assumptions. He is the author of many books including one of my favorites, Dead Men Ruling, that explains why so much of today’s budget and projected budget were determined years ago. 

“We’ve gone through several decades where we’ve relied as a government on essentially covering our expenses by borrowing and we’ve relied on juicing up the economy by continually having very low and, actually on an after-inflation after-tax basis, negative cost of borrowing,” Steuerle said. “And my point is somewhat simple. I just can’t see the debt growing forever.”

He sees the same problem with monetary policy. “You can have negative real rates with inflation. But it’s pretty hard to have negative nominal rates, and we’ve gone down this path for so long, I think it’s ending and that brings a day of reckoning.” Steuerle also worries that today’s fiscal policies are shifting burdens from the old to the young. “The question has always been that if the younger generations are a lot richer than the older generations then there’s an argument that maybe it’s not so bad for older generations to pass on additional debt to them,” he said. “I don’t necessarily buy into that argument.”

In Steuerle’s view, “the long history of humankind is that each generation tries to make things better for the next generation and in some sense, in a social sense, we’ve done something very, very unique in modern times. We no longer necessarily have older generations making those types of transfers to younger generations, but coming to expect, often indirectly, that the younger generations are going to be the ones that they rely upon, at least to a much greater extent than in the past.”

He noted that “the history of Social Security and Medicare and healthcare in general has been one where a lot was promised to early generations,which they didn’t have to pay for. That was a good idea, because the elderly particularly, but also the disabled, and some of the groups we protected were poorer than everyone else. That’s no longer necessarily true. In fact, the latest CBO numbers say that the elderly are now richer, if you count at least the value of their healthcare, and we could debate whether that should be counted or not, are richer than the younger generation. So how much more should we increasingly make transfers from the young to the old?”

We also discussed with Steuerle some possibilities for Social Security and Medicare reform and we ended on a positive note with why he thinks there are some reasons to be optimistic.

Hear more on Facing the Future. I host the program each week on WKXL in Concord N.H., and it is also available via podcast. Join our guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.


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