Miller on Buffet’s mistake
November 27, 2012 Leave a comment
Matt Miller has a new piece arguing that Warren Buffet’s call for a cap of federal spending at 21% of GDP is wrong. He makes a convincing case that 21% of GDP is too aggressive a spending target given the reality of the baby boomers, primarily because he says it is not high enough to enable the infrastructure investment and renewal spending the nation needs. However, he makes another important point that is worth highlighting:
…We can obviously balance the books at any level of spending and taxes. The question our leaders must ask is why we should prefer one level over another. That can only be answered with a more concrete policy vision to bolster upward mobility, equal opportunity and economic security in a global age.
It is important to note that all 21% of GDP federal spending regimes are not the same, and the content of the spending proposed is key. As I noted yesterday, my book also identified 21% of GDP as a balance point, but that my notion of a tax based fail-safe linked to health care costs (automatic tax increases if requisite spending level growth targets are not met) would increase spending above 21% of GDP. And lets face it, the default assumption for any health care regime designed to spend less than is otherwise planned should be that nothing will work as well as it might.
I definitely based this balance point (Buffet calls for perpetual deficit of 2.5% of GDP, whereas I was calling for taxes collected to rise to 21% of GDP) off of the fiscal commission report, in large part because it represented a middle ground of what had been proposed by different groups. However, my book is mostly about the need for a sustainable budget and the next steps on health reform that I think could make that possible. I didn’t detail infrastructure or “renewal” plans as Miller calls them, but that is an important conversation.