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COPYRIGHT 2004 Thomson Financial Inc.
This is the first part of a Perspectives series on Medicare and the nation's fiscal future.
Economists--from the left, right, and center--seem to be on the same page these days. According to the hymnal they're singing from, the United States is headed toward an increasingly dire fiscal future, even a likely fiscal crash, with Medicare and the health-care system in general helping drive the runaway bus.
A U.S. fiscal collapse is "inevitable" in the not-too-distant future, and Medicare issues will figure largely as a cause. So said New York University professor of taxation Daniel Shaviro June 28 at an American Enterprise Institute forum.
Some time in the next several decades, the partly Medicare-driven fiscal gap will begin to choke off economic growth by requiring tax increases on workers to keep Medicare benefits flowing, said Shaviro, an AEI visiting scholar. Such tax increases will reduce the nation's already low national savings rate, possibly making it negative, he predicts.
And that's not all. As federal budget deficits rise, "bouts of hyperinflation"--as the government prints more and more money, in large part to pay for mushrooming government expenditures--and "a banana republic-style collapse of the U.S. government's credit-worthiness" are "highly likely," he said.
Other left-leaning economists on hand at AEI to discuss Shaviro's new book, Who Should Pay for Medicare?, did not disagree with him.
While there is "uncertainty over precise figures" for the potentially collapse-triggering federal budget deficit, there is a "high probability of a serious problem," said Peter Orszag of the Brookings Institution.
"The U.S federal budget is on an unsustainable path," wrote Orszag in a paper presented at a January meeting of the...
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