"The public debate about deficits has been dominated by futuristic predictions that the US (and other nations) will run out of money because of the increasing demands on the health and pension systems as a result of the ageing society. The US federal government, like all currency issuers, does no face a financial constraint on its ability to spend in US dollars. In meeting the future demand for pensions and health care, it faces a different constraint – the availability of real resources. As long as there are real resources available, the US federal government will be able to buy them for use in the future. There will never be a financial constraint stopping this. The question about what will be made available in the future and to whom, assuming there are real resources, is a political one and will be resolved accordingly. But the availability of real resources in the future depends crucially on what happens today. First, deficit spending now is crucial to create full employment and to fund our educational institutions properly so that productivity growth is not undermined and few workers in the future will be able to produce more environmentally-sustainable output to cope with the rising dependency ratios. Second, forcing an increasing number of workers into financial oblivion now is not the way to develop a highly productive future workforce. The trends in the recent decades where the elites have pocketed higher shares of real income are not sustainable. Nothing productive comes from that."
Posted on: Thu, 29 Aug 2013 14:34:25 +0000
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