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February 06, 2014 1:09 PM Baker on Generational Equity, Health Care Providers, and Keneysian Economics

By Ed Kilgore

The roundtable on progressive perspectives on entitlements cosponsored by The American Prospect and The Democratic Strategist formally came to an end last week, but today Dean Baker of the Center for Economic and Policy Research offers a rejoinder to some of the arguments he heard during the online forum.

First, there’s the “generational equity” argument for curtailing Social Security and Medicare expenditures, which Bill Galston briefly discussed in his essay. Here’s Baker’s comment:

We pointlessly hand the right an enormous political advantage when we imply that the share of tax revenue going to programs for the young versus programs for the old has anything to do with generational equity. We’ve already lost almost $8 trillion in output from the Great Recession (more than $25,000 per person). This lost output, coupled with the destruction to families’ lives resulting from long-term unemployment and underemployment will do hugely more to hurt the life prospects of our children and grandchildren than Social Security and Medicare taxes ever could. If we want to point fingers at generational villains we should be looking at Greenspan, Rubin, and the Wall Street gang.
Assuming normal economic growth, real wages will be on average more than 40 percent higher in 2040 than they are today.
If we sustain decent economic growth there is no plausible story in which workers twenty or thirty years from now won’t be far wealthier on average than they are today. Assuming normal economic growth, real wages will be on average more than 40 percent higher in 2040 than they are today. If workers in 2040 have to pay another 2-3 percentage points of their income in taxes, that doesn’t amount to generational inequality in any meaningful sense of the term. If large numbers of workers actually are not living as well as their parents or grandparents it will be due to intra-generational inequality, not inter-generational inequality.

Next, Baker criticizes the premise that progressives are already doing what they can to hold down health care costs:

I have repeatedly advocated trying to push for more open trade in health care as an end-run around the powerful interests that keep up costs. This is a way of focusing on the fact that the debate has nothing to do with free market ideology, it is a debate over protecting the high incomes of health care providers pure and simple. While I find allies on this one on the more conservative side of the political spectrum, progressives seem to find the concept confusing. I know it’s hard for intellectuals to think about new ideas, but sometimes it is necessary to try. The effort to contain health care costs is one such case.

And finally, Baker responds to Andrew Levison’s proposition that progressives have lost the public-opion battle over the Keynesian economic assumptions that underlie much Democratic political positioning:

Keynesian economics is true regardless of its popularity, just like gravity and global warming. If people do not accept Keynesian economics as it has been presented, then we have to find other ways to present it. (It doesn’t help that our “progressive” Democratic president is on the other side on this one.) The reality is that we will not have full employment without large budget deficits or bubbles unless we get the trade deficit down. There is no way around this fact.

I don’t know if other rejoinders will ensue, but I remain pleased that this roundtable is being conducted in a civil manner with a minimum of name-calling. Maybe it will provide more light than heat for future progressive debates.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

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