Economics

Will robots solve America’s debt problem?

It’s hardly surprising that President Barack Obama doesn’t have a long-term debt plan (or at least not one acceptable for public display). As Treasury Secretary Tim Geithner infamously told House Budget Chairman Paul Ryan, “We’re not coming before you to say we have a definitive solution to that long-term problem. What we do know is we don’t like yours.”

Liberals don’t like to talk about fiscal debt and deficits. If they do, eventually the conversation must curve around to how they intend on paying for their dreams of an ever-expanding welfare state. And that means talk about sharply higher taxes on everyone — or scaling back liberal ambitions to keep enlarging the social safety net.

Here’s one example of how liberals would prefer to talk about, say, green energy investment than green eyeshade accounting. In a column for Bloomberg, Ezra Klein declares that he’s “not particularly worried about the budget deficit. In fact, of all the major problems the U.S. faces, I’m least worried about the deficit.”

How can Klein be so blasé with the U.S running trillion-dollar annual deficits as far as the eye can see? First, he points out that if the Obama White House and Congress do nothing between now and year end, nearly $7 trillion in ten-year deficit reduction — higher taxes and lower spending — would begin to automatically kick in. Not that Klein wants that scenario to occur, mind you. He just highlights it as a sort of a proof of concept that Washington has the tools to solve the debt problem.

And if even the politicians aren’t willing to act on their own, he adds, frightened financial markets will eventually force them to. Of course, markets offer a rather terrible sort of salvation. A debt-driven financial crisis would force sudden and draconian austerity. We really would be Greece.

Second, Klein says that the future is very far away and many wonderful things are likely to happen between now and then. Indeed, he gently mock the debt doomsayers: “They brandish charts showing scary red lines reaching out to 2080. Those charts show a huge problem that requires radical solutions. … But those charts are really about health-care spending … What they’re really telling us is this: If you look at how medical costs have risen in recent decades and you draw that line out for 70 more years, we’re really in trouble. … But there’s something ridiculous about extrapolating current trends all the way out to 2080. By that point, we’ll probably either be robots, the servants of robots or a bit of both. Either way, the health-care system will probably undergo dramatic change.”

So rather than hoping for the best and preparing for the worst, Klein advocates hoping for the best and preparing for the best. Now he might be right. An accelerating pace of technological change might save us by creating warp-speed economic growth so we could easily finance all that future debt. Or perhaps technological wonders will somehow reduce healthcare costs. Maybe low-cost nanonbots roaming in our bloodstream will immediately heal us from all injury and disease. Everyone an X-Man.

Except that healthcare costs have been outpacing economic growth. Consumers seem to have an insatiable demand for healthcare services, especially when they aren’t directly paying for it themselves, a trend Obamacare, which Klein supports, reinforces. And the debt problem isn’t some futuristic, 2080 concern. For instance, there’s a Congressional Budget Office forecast that a) assumes Washington doesn’t deal with exploding entitlement spending and b) assumes sharply higher debt levels do hurt the economy. According to that plausible scenario, CBO sees debt as a share of GDP rocketing from around 70% today to 250% of GDP by 2035.  That’s a recipe for a debt crisis sooner rather than later. We might not have time for Klein’s sci-fi Singularity to save us.

So what does Klein think Washington should be worried about? “Catastrophic climate change” for one. Yet the same forces that Klein suggests might make all our debt problems go away also apply to the environment. There might be stunning advances in climate geoengineering and other technologies allowing us to vacuum up all that nasty, excess carbon. And with gobs of innovation driving economic growth, we’ll have a lot more dough to pay for Medicare, right? Unless, of course, we get a debt crisis way before 2080, and the U.S. shift into slow-growth mode.

Americans should worry about the deficit and ballooning national debt. They should embrace politicians who want to reform entitlements while also reforming the tax code so that it better rewards investment and innovation. And there’s no time like the present to get started.

 

 

7 thoughts on “Will robots solve America’s debt problem?

  1. The big problem with health care (for most Americans) is the increased “insurability” of issues that have no business being insured (i.e., birth control, or sex change operations). A framework that allows individuals and groups to cross state lines would allow different states to give different options. California could require all insurance companies in the state to allow adadictomies, Utah would give a plain Jane (or Joe) health plan. Companies located in Utah would thrive, and those Californian’s who want the Jane to Joe plan would actually pay what its worth, and those Californians who bought from Utah would have more focused, cost effective, insurance.

    So, that covers the horror of health care for working Americans. How about the elderly on Medicare? Well, the single payer system, or Obamacare, would take care of those expensive elderly who need dialysis, or who have dementia, by saying “No soup for you!” They would be denied health care, because the system couldn’t afford it. Or they would receive substandard treatment like they do in Britain, where the elderly are left to starve or to waste away, or whatever avoidance mechanism can be found.

    So, how should conservatives deal with this? Dementia is a problem that has been found to be nearly intractable. A lot of private and public (and a lot, I mean in the 100′s of millions – fairly small by the standards of Obama who regularly tosses 10′s of billions at solar) has been spent, but most private concerns have come to the conclusion that research in this area is too costly and is bound to be a money pit. Kidney research is doing a bit better – the same company that is trying to grow kidneys from adult stem cells (thereby eliminating the largest ongoing cost of transplants – a cost that is almost as much as dialysis and that lasts longer due to the fact that the patient now has a functioning kidney) has successfully grown bladders (which the FDA has grudgingly allowed to be used for spin bifida patients – FDA is an organization that will need reorganization under any conservative government). But kidneys are still exceptionally complex, and most corporations blanche at the thought of poring money into such research.

    The answer is similar to the answer chosen near the beginning of the cold war. The national labs have been for 50 years a focus of excellence in physics and in defending the nation. In the beginning, they offered those who joined an unsurpassed opportunity to research and to explore, and were very successful in opening the complexities of high energy physics.

    Recently, they have degraded. That is not their fault. Nuclear weapons are not what they once were. Most people who work there know how to make a Reliable Renewable Warhead – and if given an opportunity could give Obama his wish of less weapons, and allow us still to retain the ability to crank out quickly the number we need. (THis is of course a discussion for another time). But beyond that, they have turned into bureaucratic hellholes.

    But we could use the same model for, say, three bio national labs. Give scholarships to some of the brightest students and give them an opportunity to go there. Set up the labs in desirable (yet lower cost) areas. Offer salaries that are above and beyond what they could get schlepping around a doctors office. And use the proceeds from their efforts to eventually completely fund the labs, and to give huge returns to the workers there. Make them the googles of bio.

    Dementia is responsible for a quarter of medicare costs. Kidney disease (and diabetes) are responsible for 25% (there is some overlap, but not a lot – say the three together represent 40%). Cures in the next decade, as well as the other spinoffs from these bio national labs, could substantially reduce the oncoming medicare cost nightmare. Other bio products would have the capability to change the world like computer systems have done. But there is a need that I think can only be seeded by government. It does not have to remain that way – they will eventually fund themselves – but it is “a third way” out of the conundrum we face.

  2. I should mention that health research is not magic. Its science. Given enough effort, we can understand the relevant biosciences – and cure them. That is worth a small investment in the biogoogles now.

    So – why can’t they do it on their own, like google? Lot more expensive to buy the biomedical equipment necessary for research. But a government financed biogoogle should begin to pay for itself from medical breakthroughs in less than a decade. In 20 years, they should be completely del-sustaining….

  3. It must be said not everyone can be a “blogger for the American Enterprise Institute,” although the available evidence indicates that almost anyone could be “a blogger for the American Enterprise Institute.”

  4. Klein won’t talk intelligently about debt and deficit because he can’t. His political idols have no answer, nor does he. It is reasonable to conclude liberals are trying to destroy the economy. Maybe not, but they might as well be. The thing to do is to talk past them to the American people, pleading for responsibility. Hold up the idiocy of Klein and other liberals as great examples of how they are completely unfit for command. They are functionally irrational. They had their chance at leadership and it only proved they are multi-level catastrophes.

  5. I encourage everyone to view the March 2012 Charlie Rose video of the 51 minute interview with Erskine Bowles and Allan Simpson. If you recall, Bowles and Simpson were appointed by Obama to form a committee to look into how to handle the debt and deficit. Once the Bowles/Simpson committee concluded their work, Obama rejected the committee’s solution and formed the laughable Super Committee. The problem is more than healthcare. It’s defense spending, Medicaid and Medicare, Social Security and tax reform. Here is an eye opener. Just to maintain the current debt at its current level, the U.S. government will have to cut $ 4 trillion over the next ten years! Just to stabilize and not reduce the debt, that is 400 billion in new cuts every year for ten years. There is a hell of a lot of pain a coming for us all. EVERYONE FIND THE CHARLIE ROSE INTERVIEW ON THE WEB AND PASS IT TO EVERYONE YOU KNOW! DON’T BE FOOLED! THE DEBT IS THE NUMBER ONE PRIORITY AND THE NEXT ELECTION IS DO OR DIE FOR OUR COUNTRY!

  6. Right wing inhuman madness like this article is the real threat to the West – you can’t build or sustain a flourishing society in which individuals find self-actualisiation with an anti-social economics.

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