Alex Tabarrok writes,

Now let’s apply these issues to another one close to your life. Savings and retirement. Savings also follow an exponential process, albeit one neither as rapid nor as certain as those involving viruses. The same principles apply, however. But in this case instead of wanting to avoid the gains at the end you want to start saving early in order to capture the big gains in your 50s and 60s as you approach retirement. You don’t get many attempts at retirement so you need to use theory rather than experience. And because you don’t get many attempts you need to learn from other people, including other people’s mistakes, to guide your savings decisions today.

Economists usually look at saving for retirement as a decision that will be based on “rational, forward-looking behavior.” I think that Alex is much more realistic. He points out that people learn best from repeated personal experience. If you mess up the decision to save for retirement, you don’t find out the consequences until it is too late. To make good decisions, you have to learn from theory and from the experiences of others.

A related issue is deficit spending by the government. We have no personal experience of deficits leading to bad outcomes. People like me point out that in theory the government has to stop piling on debt at some point. But if people need to learn that lesson from experience, it will be too late.

if you ask Lyman Stone.

A country that was once typified by a sense that anyone could be or do anything is now hidebound by an increasingly heavy weight of rules and regulations. While this trend toward more regulation and greater constraints on regular life can be seen across all walks of life, this report focuses on five main areas:
• Increasing stringency of land use regulations such as zoning,
• Greater prevalence of restrictions on work such as occupational licensing,
• Unusually high incarceration rates given currently low crime rates,
• An education system that forces people to spend more years in school for a higher cost and less value, and
• Growing debt and other financial burdens among households and at all levels of government.

On the debt issue, Timothy Taylor writes,

Interest payments are already 9% of federal spending. Before just brushing past that number too quickly, it’s worth noting that net interest is 1.8% of GDP–call it about $360 billion that the government is spending because of past borrowing, and thus doesn’t have available for current spending, tax cuts, or deficit reduction. On the current path, interest spending will be 20% of all federal spending by 2049.

…This is a “current law” projection. It has become standard practice for the federal budget to play games by forecasting that certain spending programs will be cut and certain taxes will rise in the future. But when the actual date of such changes approaches, they are then pushed back a few more years. The CBO also constructs an “alternative fiscal scenario” which doesn’t assume that these spending cuts and tax increases scheduled for the future will actually happen. In that scenario, the rise in deficits, health care spending, interest payments, and debt is much larger.

Have a nice day.

Jared Bernstein writes,

as economist Brad DeLong recently showed in a Vox interview. DeLong, who calls himself a “Rubin Democrat” (a reference to Clinton’s centrist treasury secretary, Bob Rubin), argues that the moment is such that “The baton rightly passes to our colleagues on our left. We are still here, but it is not our time to lead.” “DeLong believes,” according to the piece, that “the time of people like him running the Democratic Party has passed.”

In fact, there seems to be a widespread sentiment on the (formerly) center-left of saying about the hard left “If you can’t beat ’em, join ’em.”

To me, it seems that it is not just that the political discussion is moving toward the hard left. I see something similar going on among economists. Some prominent recent examples:

1. Emmanuel Saez and Gabriel Zucman.

2. Olivier Blanchard.

3. Jason Furman and Lawrence H. Summers.

What I call hard-left economics argues that high marginal tax rates on the rich have little or no adverse consequences. It argues that large government deficits have little or no adverse consequences. As a result, the bumper-sticker version of these papers would be:

Government should tax the rich more, because it can.

Government should spend more, because it can.

I can remember how economists on the left excoriated George W. Bush for squandering the budget surplus that President Clinton had started to build. That surplus was supposed to help avoid a collision of Baby Boomer retirement with fiscal capacity. DeLong once snarked that President Bush thought it was fine to run big deficits “because there are still checks in the checkbook.”

“There are still checks in the checkbook” has become the new fiscal wisdom.