Martin Feldstein on time consistency in fiscal policy

“When I look at the current fiscal situation, in contrast to what we experienced in the '80s when the fiscal deficits were larger and rising, and debt-to-GDP ratios were rising, we're currently at a relatively comfortable level. The federal deficit-to-GDP ratio this year will be under 3 percent, probably low enough that the debt-to-GDP ratio will actually come down.

The problems are not that very far into the future, though, with increases in Social Security and Medicare costs relative to the tax revenue that comes in. The markets seem to be ignoring that, which is a puzzle, but there's nothing about long-term interest rates that suggests that the markets are afraid that Social Security and Medicare are really going to create large fiscal deficits. Now maybe they're right. And maybe the political process will raise taxes or cut benefits. What has to be done is to reform those programs. I wouldn't set my goal in terms of the fiscal deficit. I'd set it in terms of limiting the tax levels that are going to be needed to support them.”

- Interview with Martin S. Feldstein- latest Region magazine

The Region also has review of Martin Wolf’s Why Globalisation Works
See also this book review-Development's Discontents

The Nation's Long-Term Fiscal Outlook: September 2006 Update
A Visual Representation of the US Federal Budget


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This page contains a single entry by Paul published on September 22, 2006 1:55 PM.

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