Brad DeLong's Semi-Daily Journal: A Weblog: A Letter to a Noble Friend on the U.S. Budget

Brad DeLong is a professor of economics at UC Berkeley. He write a blog about economics, politics, and other items of interest. Here is a piece of his blog about the future of the federal budget, and the consqequences thereof.

You asked my opinion about Social Security, and about the long-run federal budget mess more general...

Well, the way I look at it (and this *is* what I do at my day job), we think that the promises and commitments the U.S. government has made and its standard operating procedures for setting spending amounts commit us to an average federal spending level of 25% of total production over the next two or so generations. We know that number will be off--it might be 23%, it might be 27%. But 25% is the number we should have in our minds when we plan.

Now taxes are currently set so that, if standard operating procedures for tax break extension, et cetera, are followed, the federal government will collect some 18% of total production in taxes. 18% is a lot less than 25%.

We as a society have two choices. We can either ignore the gap between 18 and 25 until the foreigners we borrow from lose confidence that we will ever solve it, and our economy and currency go smash in the way that Argentina's seems to every generation, that Mexico's did in 1994, that Germany's did in 1923, and so forth. Or we can take steps to close the gap between 18 and 25. And the sooner we start to take those steps, the easier things will be.