Eugene Steuerle's response to Henry Aaron in a point-counterpoint debate about America's fiscal struggles. This discourse includes agreement and disagreement, yet is honestly presented without the noise and confusion that often surround these issues. Steuerle's and Aaron's essays and responsesto each other originally appear in the Journal of Policy Analysis and Management. Steuerle, C.E. (2010) "Why We Must Untie Our Fiscal Straightjacket: A Response to Henry J. Aaron." Journal of Policy Analysis and Management, 29(4), 891-893.
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Henry Aaron and I approach fiscal policy in many similar ways. Those who know
us also know that we have collaborated on many issues and understandably might
wonder why we are Point/Counterpointing here. That said, our approaches differ
in two simple ways. From my perspective:
- The deficit is a symptom of a larger problem. Gaining control over macroeconomic
policy, reorienting our budget toward our greatest needs, investing in our
children, and escaping our current political straightjacket first requires restoring
much more "give" in the budget and leeway for future decision makers.
- When it comes to policies toward retirement and health, government policy
fails not because the annual benefits it provides are too high, but because it
has morphed into supporting middle-age retirement, distinguishes inadequately
between ability and income in assessing need, and fails to put all
health subsidies into controllable, as opposed to open-ended, budgets.
First, some points of agreement. Aaron and I both worry about achieving a sustainable
fiscal policy. We both consider forecasts "notoriously inaccurate" and the
rise in debt/GDP ratio as more troubling in some ways than it was at the end of
World War II. Further, we both think that enacting deficit-reduction policies early
but implementing them gradually is feasible and wise and that Social Security is
only a moderate (Aaron says "negligible") part of the problem. We both believe that
the tax code can be cleaned up considerably, accept the necessity of tax increases,
and recognize that cutting back on tax expenditures is equivalent to cuts in spending,
not increases in taxes.
Perhaps less obvious, we both believe strongly in progressivity. Like Aaron, I
oppose means-testing Social Security if the aim is reducing benefits for some to
zero or negligible amounts. Among other reasons, annual income means testing
doesn't measure need or ability to pay very well, especially for those not working.
Note, however, that Social Security already does and can "means test" insofar as it
provides lower rates of return to those with higher lifetime earnings or collects
income taxes on benefits.
So what are Aaron and I sparring about? Returning to the five fiscal problems I
outlined previously, I favor greater amounts of reform to achieve a more flexible
macroeconomic policy, attain clear fiscal sustainability (barely obtaining sustainability
by 2025, in my view, does not meet that test), enhance fiscal democracy and
leave more decisions to future voters, scale back the fiscal sclerosis that derives
from ever-higher emphasis on consumption, and modernize old-age supports by
allocating marginal dollars better with equity, progressivity, and efficiency in mind.
(End of excerpt. The full article is available in PDF format.)
For the rest of the debate, see:
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