The Urban-Brookings Tax Policy Center held a symposium Wednesday to discuss the new book titled “Fiscal Therapy: Curing America's Debt Addiction and Investing in the Future” by the Tax Policy Center’s William Gale.
At the event, Doug Elmendorf, former director of the Congressional Budget Office, argued that we should not be trying to reduce near-term budget deficits, given that interest rates are low and can be expected to stay low for some time.
“I think it is appropriate at this point to conclude that the United States should have substantially more federal debt than most economists would have argued for several years ago,” Elmendorf said, “and that conclusion further implies that there is less urgency to putting federal debt on a sustainable path than most economists would have argued several years ago.”
Still, Elmendorf argued that debt can’t rise indefinitely relative to total output and reducing federal budget deficits will be necessary at some point — just not right now.
Gale agreed that the national debt is not a crisis, but he argued that the long-term debt is still a problem, even if it never causes a crisis. “The reason we are concerned is that even though it will not cause a crisis, it will cause gradual concerns,” he said. And he laid out his proposed solutions to those long-term problems of rising debt and lagging investment: control Social Security and Medicare while preserving their anti-poverty and social insurance features; invest more in children’s programs, human capital, infrastructure, and research; raise and reform taxes.