Brad DeLong on the long-term debt

Perhaps my favorite economics blogger. Brad has probably been spending more time lately talking about the logic of short-run policies for macro stabilization, but he has a long history bringing attention to the long-term fiscal problems. It's also worth highlighting his recent paper with Larry Summers, which discusses why the most credible commitment to a strong long-term budget stance right now is to commit to a fiscal response to the recession. Short-run austerity is self-defeating and bad for the long-run budget picture.

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1. [This one has less to do with the time-inconsistency point, but if you didn't notice... Brad likes PAYGO. It sort of addresses the time inconsistency point, though. It's true that "pledging to follow PAYGO" isn't a guarantee on the future, but starting to follow PAYGO is clearly a short-run commitment that could be made]: "If Obama were to pledge--and get everybody running for his seat to pledge--not to sign any bill that breaks PAYGO, we don't have a long-run deficit problem. If the majority and minority leaders of the Senate and their successors pledge not to let anything move through the Senate that breaks PAYGO, we don't have a long-run deficit problem. If the Speaker of the House and his successors pledge not to let anything move through the House that breaks PAYGO, we don't have a long-run deficit problem. It boggles my mind why Barack Obama did not, on January 21, 2009, promise to veto everything that broke ten-year PAYGO. I am morally certain that this is what Peter Orszag told him to do. I am morally certain that this is what Jack Lew is telling him to do." (here).

2. "Right now we should be having a policy debate over what to do in the wake of the expiration of the imprudent and damaging Bush-era tax cuts. Should we enact another set of permanent or long-term tax cuts? The answer is no—because our existing tax structure makes insufficient provision for the rising costs of Medicare, Medicaid, national defense, and Social Security. Thus we should be enacting policies that bring our long-term spending commitments and our long-term revenue plans back toward balance—rather than repeating the feckless misgovernment of the Bush years and enacting policies that drive spending and revenue further apart.

We should also be having a policy debate about what form our tax system should take. We should consider relieving the tax burden on factors of production—the raw materials that go into producing goods and services—and shifting it instead to purchases by way of a federal value added tax." (here).