September 21, 2011
Thomas Friedman joined the ranks of the Peter Peterson deficit hawks and criticized President Obama for not wanting to beat up the elderly. Specifically, he is upset that President Obama did not propose cuts to Social Security and Medicare.
Apparently Friedman is not aware of the upward redistribution of income over the last three decades. Nor does he seem to understand that the government just needs to spend money to create jobs now.
The current crisis is the result of the collapse of a housing bubble that he and his deficit hawk friends allowed to grow unchecked. The construction and consumption demand created by the bubble was driving the economy. Now that the bubble has collapsed there is nothing to replace this demand.
In the short-term this demand can only come from the government. In the longer term it will have to come from more a smaller trade deficit as domestic production replaces foreign production. This will only come about from a lower-valued dollar.
The long-term deficit is driven entirely by the broken health care system in the United States. If the United States paid the same amount per person for care as people in any other wealthy country we would be looking at large budget surpluses, not deficits.
Social Security is already largely in balance. According to the Congressional Budget Office it can pay all scheduled benefits until the year 2038 with no changes at all. After that date it can pay more than 80 percent of scheduled benefits indefinitely. A tax increase equal to 5 percent of the wage growth projected over the next three decades would be sufficient to allow it to make all scheduled benefits indefinitely.
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