Debt, Deficits, and Demographics: Why We Can Afford the Social Contract

 

NEXT SOCIAL CONTRACT INITIATIVE

Debt, Deficits, and Demographics: Why We Can Afford the Social Contract

by Dean Baker, Co-Director, Center for Economic and Policy Research

Will the national debt hurt future generations? Will an aging population bankrupt our social programs? Economist Dean Baker explains why the mainstream thinking that answers 'yes' to these questions is misguided. In a new paper published by the Next Social Contract Initiative of the New America Foundation, Baker debunks the idea that deficits are a problem in the current economic climate. In an economy running below capacity, government deficits can make future generations better off, rather than worse off. Baker, the co-founder and co-director of the Center for Economic and Policy Research in Washington, DC, also explains why demography does not equal doom. Productivity growth will raise living standards of the entire population even with aging, he argues, and any increase in long-term debt is due not to aging but to a failure of the health care system to control costs for everyone. "The economy and the country do face many real problems going forward," he writes. But "by misdirecting attention toward debts and deficits, our policy focus has been diverted from the issues that will truly have the largest impact on the standard of living of future generations." Read Debt, Deficits, and Demographics: Why We Can Afford the Social Contract by Dean Baker. Download the PDF of the paper directly here.

RENEWING THE AMERICAN SOCIAL CONTRACT Renewing the American Social Contract is a series of major policy papers outlining bold proposals from leading thinkers for reforming American social policy in areas from wages and job creation to taxation and the welfare state. Representing diverse perspectives from across the political spectrum, the contributors to the series share a commitment to questioning orthodoxy and enlarging the boundaries of debate.    The next paper will be by Robert Kuttner of the American Prospect magazine on investment in the service sector as a way to spur economic recovery. Please see the full list of papers here.