The Government We Deserve

Decades ago, my parents taught me a simple lesson: when something goes awry and its outcome remains uncertain, do what you can and should do to the best of your capability. The future may not be entirely in your control, but by setting some good things in motion you make tough issues easier to handle.

Expressed in various forms, the idea is that baby boomers' retirement isn't really a problem until the economy fully revives, that people in late middle age should quit to make room for younger workers, and that the multi-decade failure to adjust retirement ages for longer lives is a can we can keep kicking down the road.

Failure to understand the causes of today's historic impasse will stymie those budget reformers tempted to believe we can use the traditional pro-growth strategy to get our fiscal house in order.

Few commissions change the world, and most fail. Yet, too often, blame is heaped solely on circumstances outside the commission's control, as though how well the commission conducted its business didn't matter. Steuerle outlines six ways that the president's budget commission—particularly its chairs—can up the odds that it will succeed.

One of the most frustrating aspects of the health reform debate has been the extent to which many legitimate questions about what might work were ignored in favor of fights over ideology. As advocacy triumphed over expertise, those who promised more than they could deliver fought with defenders of an unsustainable status quo. One result is that the new health reform still needs a lot of fancy structural work to stand and extensive plumbing to be usable.

With economic recovery from the deep recession in view, a double-headed challenge remains. Reducing the deficit requires cutting back government spending, but we still need to promote employment and work, and that won't come free. Given this administration's progressive leanings, its attention to low- and moderate-income workers is surprisingly modest.

It's an old story. Come a financial collapse, somebody's got to pay to get the nation's financial house back in order. While many on Wall Street made millions losing money for their companies, every young American is now saddled with tens of thousands of dollars of additional government debt. While buyers walked away from homes when they went underwater, others who had mustered large down payments simply absorbed their losses—in some cases, wiping out years of saving. While speculators who borrowed to buy stock or real estate shrugged off debt by declaring personal or corporate bankruptcy, those who invested in their 401(k)s helplessly watched their retirement savings erode.

In a speech to the American Economic Association on January 3, Ben Bernanke, chairman of the Federal Reserve System, took on the question of whether easy monetary policy led to the recent bubble in housing prices. I don’t disagree with his broad conclusions about the importance of regulatory policy. But it wasn't until the end of his speech that he dabbled briefly with the far more important question: whether new types of monetary, fiscal, and regulatory actions are required to contain bubbles in all major assets, not just housing.

Should Medicare set prices for what it covers? Should it determine what services it will cover? During the health reform debate, these questions have dogged attempts to reduce unsustainable Medicare cost growth. At the most basic level, the questions are silly. Of course Medicare sets prices. Of course it determines what services it will cover. It just doesn't do it very well—for reasons ranging from limited administrative power to constant political interference.