I encourage everyone to read The Washington Post’s editorial from over the weekend “We Still Need A Grand Bargain” not so much because the arguments are persuasive but because it underscores the argument I made here about why the changing facts about the US deficit situation won’t alter the debate. The only thing the Post says that’s really of any significance is this:
It is not equitable to continue transferring net resources from young to old, especially when so many of the latter are well-off compared with many of the former.
To my way of thinking that’s a pretty questionable assertion. But really this is the assertion we ought to be debating. The underlying issue here has nothing to do with deficits and debt and everything to do with the extent of government fiscal transfers to the elderly. There is a view, driven by a mixture of motives, that it is simply wrong and irresponsible for the government to be devoting a large and growing share of the economy to bolstering the living standards of old retired people. For whatever reason, the people who want legislative action to reduce the living standards of senior citizens prefer not to frame it that way. But their view is that a government guarantee of high living standards for senior citizens reduces the savings rate and reduces labor force participation and that this trend in public policy should be halted.
If that analysis is morally and economically correct, then it remains correct regardless of interest rates or 10-year budget projections. And it would be helpful to the world to debate it plainly.