At the debate last night, moderator Chris Wallace challenged both candidates on the question of cutting Social Security and Medicare. The implication is that the country is threatened by the prospect of out of control government deficits. The question was misguided on several grounds.

First, as a matter of law the Social Security program can only spend money that is in the trust fund. This means that, unless Congress changes the law, the program can never be a cause of runaway deficits.

Second, it is important to note that the size of the projected shortfall in the Medicare Part A program (the portion funded by its own tax) has fallen sharply in the Obama years. The shortfall for the 75-year planning horizon was projected at 3.53 percentage points of payroll in 2009, the first year of the Obama presidency. It has now fallen by 80 percent to just 0.73 percent of payroll. This reduction is due to a sharp slowdown in the projected growth of health care costs. Some of this predates the Affordable Care Act (ACA), but some of the slowdown is undoubtedly attributable to the impact of the ACA.

Anyhow, the implication of Wallace's question, that these programs are somehow out of control and require some near term fix, is not supported by the data. We will have to make changes to maintain full funding for Social Security, but there is no urgency to this issue.

On the more general point of deficits, the country's problem since the crash in 2008 has been deficits that are too small, not too large. The main factor holding back the economy has been a lack of demand, not a lack of supply. Deficits create more demand, either directly through government spending or indirectly through increased consumption. If we had larger deficits in recent years we would have seen more GDP, more jobs, and, due to a tighter labor market, higher wages.

The problem of too small deficits is not just a short-term issue. A smaller economy means less investment in new plant and equipment and research. This reduces the economy's capacity in the future. In the same vein, high rates of unemployment cause people to permanently drop out of the labor force, reducing our future labor supply if these people become unemployable. (Having unemployed parents is also very bad news for the kids who will have worse life prospects.)

The Congressional Budget Office now puts potential GDP at about 10 percent lower for 2016 than its projection from 2008, before the recession. Much of this drop is due the decision to run smaller deficits and prevent the economy from reaching its potential level of output. We can think of this loss of potential output as a "austerity tax." It currently is at close to $2 trillion a year or more than $6,000 for every person in the country.

It is unfortunate that Wallace chose to devote valuable debate time to a non-problem while ignoring the huge problem of needless unemployment and lost output due to government deficits that are too small.