From Laurence Kotlikoff:
The US fiscal gap now stands at an estimated $205 trillion, or 10.3 percent of all future US GDP. Closing this gap is imperative, and requires a fiscal adjustment of an immediate and permanent 37 percent reduction in spending (apart from servicing official debt), an immediate and permanent 57 percent increase in all federal taxes, or some combination of the two. The necessary size of this adjustment increases the longer it is put off.
Meanwhile, all reasonable centrists can celebrate the Ryan-Murray budget compromise.
The bill will authorize $1.012 trillion worth of discretionary spending in 2014, more than the $967 billion scheduled under sequestration
Have a nice day.
Then there is Karl Smith:
The burden of our Federal Debt is as low as it has been in decades and is still shrinking. The federal debt is fairly large compared to historical norms. However interest rates are low and the government is locking in those interest rates over a longer and longer horizon. The combined actions of the Federal Reserve and Treasury are pushing the average maturity of the debt out to record lengths.
If you think of the Federal Reserve as part of the government (which you should), then the maturity of the debt is shortened, not lenghtened, by the Fed’s purchases of long-term debt.
Not when the Treasury is issuing more long term debt to take advantage of it. You can’t look at the Fed actions independently of the Treasury.
“Closing this gap is imperative” because…why?
But Krugman says we’re being starved to death by austerity. Who is right?
10.3% of all future US GDP? So Kotlikoff claims to know what US GDP will be in the year 2750? And that the US will exist in that year?
A 37% reduction in spending or a 57% increase in taxes, immediately? Does any credible person think this will produce a functioning economy? That it would it fail to produce something akin to civil war?
And in any case, the entire discussion is about accounting for “money” which while very important is not the same as real output.