Looking Ahead to Budget Cutting
Since projected expenditures within the Federal budget have long exceeded projected revenue, it follows that we probably will always have a large deficit. Since it is increasingly possible to define the most efficient level of taxation (somewhere around 18% of Gross Domestic Product, or GDP) by experimentally raising or lowering taxes and then observing the revenue produced, attention shifts to spending levels. At least so far, no one has suggested a level of government spending which is ideal, or efficient, or sustainable. But since large deficits are surely not indefinitely sustainable, it's hard to escape the logic that government spending levels should be just a little greater than 18% of GDP.
Moreover, since entitlements like Medicare and Social Security already make up most of the spending, and will soar in a few years when the baby boomers reach retirement age, it is already acknowledged that no amount of tax increase can balance a deficit of that size. Raising taxes is now recognized to have its own measurable cost, while infinitely rising deficits will surely be blocked by the bond market. Unless you just ignore the recession which would be caused by soaring long-term interest rates, spending must be cut severely. Just about the only remedy left is to shift the cost of entitlements to the private sector. By increasing private savings and drawing compound interest, some unknown amount of progress might be made on this problem. The retirement age must also be increased, second careers after retirement must be encouraged, the costs of retirement must be reduced -- and all other ideas must be explored, too. But one of the main arguments for increasing private savings is that all of the ideas anybody has suggested, rolled up in a ball, are questionably sufficient to finance the approaching problem. It will simply not be possible to evade a serious examination of any suggestion, including this one. Privatize. The public sector is just not big enough to handle the matter, and if you make the public sector bigger, you will destroy the whole economy. Privatize.
It's common belief that the cost of financing Social Security is not nearly as difficult as financing Medicare, but that's just the extrapolation fallacy announcing that trends in motion will continue forever. Medicare seems to be getting more expensive for three reasons, all temporary. The costs of dying are shifting into Medicare as the population lives longer; eventually, just about everyone will live long enough to die at Medicare's expense, and terminal care costs must then stop shifting. Furthermore, the cost of dying is going to decline as medical research turns to the engineering costs involved, separate from heroic efforts to forestall dying. No one is suggesting euthanasia; just simplifying the issues once a final decision has been made. Finally, the cost of chronic illness and disability needs to seek both curative and engineering improvements. Take rheumatoid arthritis (RA) for example.
Thousands of people are painfully crippled every year by RA. They are treated, medicated, pensioned, operated on, and provided with complicated equipment. Suddenly, some new medications have come along which can almost guarantee there will be no further progression of RA in patients who have it; if we use them, the number of existing cripples will soon decline. It has a cost to use new medications, of course, it will cost several thousand dollars a year to offer this miracle to the rheumatoid sufferer. When the patents run out, even on the inevitably improved variants of these drugs, the cost of treatment will surely go down to a thousand or so dollars a year. Meanwhile, the backlog cost of repairing the injured joints of patients who got the disease long ago, will fade away. And the engineers will figure out how to make crutches, canes and electric go-carts out of plastic or equivalently cheap ingredients. Most of those patients who had to be pensioned will now be able to find gainful employment. Maybe, maybe, someone will figure out what causes this disease and invent a simple cure for it, but it isn't necessary to pray for miracles in order to predict a major decline in the cost of treating this nasty disorder. It is safe to predict that other diseases will follow the same trajectory as RA, leading eventually to a resolution of the fearful costs of Medicare. Social Security is something else; if everybody lives a longer healthier life, non-physicians are going to have to figure out how to pay for it.
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