I.O.U.S.A - Addison Wiggin [51]
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106 The
Interviews
The other aspect is the baby boom generation retirement, and the fact that we are all living longer. That is the thing that most people emphasize, but it is not actually the most important thing. It is part of the problem of federal spending going up in the future, but the medical care programs are going up even faster, and they are the biggest part of the problem. What that means is that since spending on those programs will go up automatically unless we change the rules, we will have to do something. The spending on those three programs by sometime in the 2030s is likely to be about one - fi fth of everything we produce. Now, one - fi fth of everything we produce is about what we now spend to fi nance the whole federal government. So unless we are willing to raise taxes and keep on raising them, or close down the rest of the federal government, we have got a very big problem staring us in the face in the next couple of decades.
Q: Is there a solution, and what does that solution look like? A lot of people think it is almost hopeless. How do we dig our way out of this?
Alice Rivlin: I do not think anyone should see the fi scal future as hopeless. In the fi rst place, we are not the only country with this problem. Everybody is facing rising medical care spending. That is true all over the world. And all successful countries are facing an aging population, people living longer. So these things are part of life in all kinds of countries. And we have a good, functioning democracy. We can get together and solve these problems. We are not a poor country — it would be much harder if we were. We are a rich country. And increases in longevity and rising medical care spending are symptoms of being a rich country. However, we have got to do something about it. We have got to decide, are we getting our money ’ s worth for all of this spending? And who is going to pay for it? And we have to fi gure out how to balance the federal budget in the long run, or come very close to balancing it, because if we do not, we will just keep on borrowing, and passing the bill on to future generations who did not create this problem.
Moreover, we cannot borrow that much. We can borrow $200
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quite willing to lend us that much money. But when we get to the really big defi cits of the future, nobody is going to be willing to lend us that much money. So we are going to have to fi gure out what to do.
Q: What is a defi cit and do they matter?
Alice Rivlin: I think defi cits matter. A defi cit occurs when the federal government is spending more than it is taking in revenue. And that means it has to borrow money. Now, right now we are borrowing some $200 billion a year. That means we are not paying for the government services we are asking our government to provide. We are borrowing the money and passing that bill on to our grandchildren. Now, I do not think that is a moral thing to do. I think the real reason to not run a defi cit is that it is not fair to our grandchildren or our children, future taxpayers, whoever they are, to pass them the bill for the things we want to do now.
Economically, it is also risky. If you borrow a lot of money, then you have to pay interest on it. The interest becomes a bigger and bigger percentage of what the government spends, and that is really wasted money. You do not get anything for it. And then there is the problem that people might not want to go on lending to the United States government forever. Now, much of our borrowing is from other countries, particularly from central banks in Asia, who are willing to lend us large amounts of money — but they might not be willing to do that for a long time. If they begin lending us less, then we would be in some economic trouble.
Interest rates would go up. We would have