Thursday, September 14, 2017

Larry Summers Explains Why Government Spending Must Grow

One could agree with libertarians that government has been spending too much and that it should be cut.  Larry Summers argues that government spending has been based upon a set of values.  Unless those values have changed government spending must increase for four reasons.

* We have assumed that government has a responsibility to assist the elderly.  The elderly share of the population is rising.  Therefore government spending must rise unless we revalue care for the elderly.

* Inequality has been increasing,  The share of income going to the top 1% has increased by 10%.  If we attempted to decrease the impact of rising inequality by only 25% it would cost government 2% of GDP

* The costs of education and healthcare have been growing faster than GDP.  Government spending must rise as the cost of those services rise.

* The ratio of US spending on defense has been declining relative to China, Russia and Iran.  US spending on defense must rise faster than defense spending by our rivals in order to prevent an erosion of our relative military capability.

Summers concludes that large tax cuts that are under consideration would be ill advised unless our values have changed dramatically in a libertarian direction.

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