In a new piece published at Project Syndicate, the conservative economist, who led President Reagan’s Council of Economic Advisers from 1982 to 1984, writes that pro-growth tax individual and corporate reform will get done — and that any resulting spike in the budget deficit will be temporary:
“Although the net tax changes may widen the budget deficit in the short term, the incentive effects of lower tax rates and the increased accumulation of capital will mean faster economic growth and higher real incomes, both of which will cause rising taxable incomes and lower long-term deficits.”
Doing tax reform through reconciliation — allowing it to be passed by a simple majority in the Senate, as long as it doesn’t add to the deficit after 10 years — is another key. “By designing the tax and spending rules accordingly and phasing in future revenue increases, the Republicans can achieve the needed long-term surpluses,” Feldstein argues.
Of course, the big questions remain whether tax and spending changes are really designed as Feldstein describes — and whether “future revenue increases” ever come to fruition. Otherwise, those “long-term surpluses” Feldstein says we need won’t ever materialize.
The Committee for a Responsible Federal Budget estimated this week that President Trump has now signed legislation that will add a total of $4.7 trillion to the national debt between 2017 and 2029. Tax cuts and spending increases account for similar portions of the projected increase, though if the individual tax cuts in the 2017 Republican overhaul are extended beyond their current expiration date at the end of 2025, they would add another $1 trillion in debt through 2029.
Are interest rates destined to move higher, increasing the cost of private and public debt? While many experts believe that higher rates are all but inevitable, historian Paul Schmelzing argues that today’s low-interest environment is consistent with a long-term trend stretching back 600 years.
The chart “shows a clear historical downtrend, with rates falling about 1% every 60 years to near zero today,” says Bloomberg’s Aaron Brown. “Rates do tend to revert to a mean, but that mean seems to be declining.”
Lawmakers are considering three separate bills that are intended to reduce the cost of prescription drugs. Here’s an overview of the proposals, from a series of charts produced by the Kaiser Family Foundation this week. An interesting detail highlighted in another chart: 88% of voters – including 92% of Democrats and 85% of Republicans – want to give the government the power to negotiate prices with drug companies.
From Gallup: “A record 25% of Americans say they or a family member put off treatment for a serious medical condition in the past year because of the cost, up from 19% a year ago and the highest in Gallup's trend. Another 8% said they or a family member put off treatment for a less serious condition, bringing the total percentage of households delaying care due to costs to 33%, tying the high from 2014.”