February 12, 2012

Barry Ritzholtz Thinks WWII Was a Permanent Entitlement Expense

At least that's the logical conclusion of his argument.  He has criticism for John Maudlin's commentary as follows:

[Maudlin:] As I continuously argue, the most important issue facing the US is dealing with its deficit, just as that is the defining issue in much of Europe and will soon be in Japan. [BR: This is a s political, not economic or Fiscal assumption. While we need to deal with the deficit, it is not nearly the issue made out by the far Right -- the US has had bigger deficits, i.e., WW2, and resolved them]

Really, so Medicare/Medicaid/SS and all the other standing entitlement programs are equivalent to WWII spending?  The one thing that was pretty certain about WWII was that it would end, and therefore the borrowing expense could be paid down.  In fact, the US ran balanced budgets through the 1960s--an "austerity" program-- for twenty years following WWII in order to pay for it.  The current deficit is structural, because unless we start a new credit bubble going or the political will to address entitlement spending it's going to get worse and worse.  Economists are howling over any talk of austerity to address the deficit.  How exactly is the WWII one-time expense comparable to our current situation?