Friday, September 12, 2003

Krugman explores the future consequences of the Bush tax cuts

The Tax-Cut Con
If taxes stay as low as they are now, government as we know it cannot be maintained. In particular, Social Security will have to become far less generous; Medicare will no longer be able to guarantee comprehensive medical care to older Americans; Medicaid will no longer provide basic medical care to the poor.

This is a long NYT Magazine article, probably worth keeping for future reference.

Unless you believe in the "voodoo economics", which has far fewer credible believers than in Reagan's days, the consequences of the Bush administration will be a greatly shrunken Federal government. Some services may be moved to the state level, but the problem is that people move between states without passports. So if a state chose to tax people to distribute revenue to the poor or poor elderly, they would loose young people and gain elderly people. Social service and poverty protection really needs to be done at the national level, with some potential state level extensions.

So what Bush is really doing is dismantling the federal social safety net, and there can be no state level replacement. I happen to think that, even excluding obvious things like boomer retirement, we're going to need that safety net far more in the next 20 years (beyond that the technology impact is so great estimation is impossible) than in the past 20 years. This is going to be very painful.

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