Yardeni: Fixing deficit can help country & economy
Economist Ed Yardeni says dealing with the budget deficits can placate the bond market, bring interest rates down and keep the housing recovery going. He's probably talking about addressing deficits mainly with cost cutting. (He hates tax increases.) He does mention means testing as a way to cut spending in Medicare and Social Security. The truth is we need to cut costs and raise taxes.
The Obama Team needs to negotiate a peace treaty with the Bond Vigilantes. The Administration will agree to slash the structural federal deficit. The Vigilantes will stop pushing bond yields and mortgage rates up to levels that will abort the recovery. This would be a win-win solution in the spirit of doing what is best for the country. The President could do what Nixon did. It took an anti-communist hawk to recognize Red China. It may take a liberal community organizer to address the looming financial crisis in the social welfare state, particularly Social Security and Medicare. Now is a good time to push for means testing of these two programs.
Comments
There is no crisis in Social Security. With some very small tweaks, the system can be made to be fiscally sound on an actuarial basis virtually ad infinitum. To that end, see the many postings on the Angry Bear blog, angrybear.blogspot.com, that detail, with great specificity, the arithmetic of Social Security funding and the relatively painless manner in which the necessary minor modifications to the system can be made.
Medicare is different. However, the fix there involves reducing the amounts paid to medical providers, particularly Big Pharma, and to reduce administrative costs. The only effective way to accomplish this last task is to make changes that go against the interests of the large insurance companies.
Posted by: Stuart Levine | June 3, 2009 8:32 PM