Paul Krugman concedes that the deficit will be a problem, and that the deficit is created by costly entitlements:
The deficit is no problem now, but eventually we will emerge from the liquidity trap, and at that point you do want to start stabilizing debt. How big a deal is that? If you look at the CBO numbers, under their “alternative fiscal scenario” (Bush tax cuts extended and realistic spending), in 2022 the deficit would be 5.5 percent of GDP, about 2 percentage points higher than would be required to stabilize debt at 90 percent of GDP.
So what we eventually need is something like 2 or more points — probably more, because aging and the rise in health care costs won’t stop in 2022. Now, that’s nothing like the catastrophic sense about the budget you get from the usual suspects, but it is big compared with anything we’ve seen so far.
So why is President Obama a “wimp,” according to Krugman, if he starts putting in place the necessary adjustments now? Because Krugman wants to erase the future deficit entirely with tax increases? No–he’s said it would take a combination of “death panels and sales taxes.” … “Death panels” was a joking reference to various methods of cutting health care costs. But is it so clear that those methods, at their semi-rationy margin, are preferable to other methods of cost-cutting–like means testing? Let’s pull the plug on granny so the Kochs can keep getting Medicare benefits? Or pay for Medicare with a regressive VAT?
Is Obama a “wimp” to consider other methods? Or does Krugman just need to stay angry? Open the door to shaving the CPI adjustment and you’re a spineless conceder who’s imposing “a lot of hardship.” But a 5% sales tax–no hardship at all!