This week on Facing the Future Bob was joined by George Mason University Professor Sita Slavov to discuss her recent essay Making Tough Fiscal Choices to Protect Future Generations and the relevance of long term sustainability to younger generations. Slavov has previously worked with the White House Council of Economic Advisors and was a member of the 2019 Social Security Technical Panel on Assumptions and Methods. Concord Coalition National Field Director Phil Smith joined the conversation.
Slavov began with the big picture for the next generation of Americans. “Young people should be concerned about fiscal issues because the federal budget is on an unsustainable path. Federal debt stands around 100 percent of GDP today but it’s projected to grow even more. The extent that the government is out there borrowing money reduces resources available for private companies to invest which harms economic growth and the wellbeing of future generations. It puts us at risk of a financial crisis, a debt crisis. And all of this puts young people’s futures at risk.”
In her essay, Slavov identified Social Security, a carbon tax, and the tax base as three major categories of potential reform. “I do think, ultimately, reform needs to be broader than just these three buckets. Obviously, things like healthcare need to be on the table. I didn’t address that at all. I focused on the areas where there are relatively straightforward reforms. Social Security, for example, the math is pretty simple. The politics is hard.”
“We are living longer and that’s, fundamentally, great news, but we aren’t working as much longer,” said Slavov on the issue of Social Security and the retirement age. “The length of retirement has gone up, and you can’t finance 30-year retirements with 40-year careers whether you’re saving on your own or whether we’re trying to do it as a society. We have got to incentivize longer working lives.”
When asked about the carbon tax proposal, Slavov closely compared fiscal policy and climate change. “These are both issues where people my age have bad incentives, right? We have an incentive to spend more, borrow more, and not protect the environment – and it’s going to harm future generations. Economists like carbon taxes because they raise taxes on an activity that harms the economy, namely carbon emissions,” Slavov said. “I try to connect fiscal policy and climate change in class all the time. I have many students who care about climate change. There’s less enthusiasm for fiscal policy.”
The third priority Slavov put forward was broadening the tax base. Tax expenditures influence economic behavior but limit the revenue the United States takes in. “These are effectively the same as spending programs. It hits your wallet in exactly the same way. I picked some of the bigger tax expenditures that I think do distort people’s choices. For example, the tax exclusion for employer sponsored health insurance incentivizes the consumption of healthcare – it increases the demand for healthcare and drives up healthcare costs. It could really be a win-win getting rid of something like that. You could raise revenue and you could improve incentives.”
Past fiscal commissions have recommended limiting tax expenditures. Bob asked Slavov about what the benefit of another fiscal commission could be. “I think it gets attention to this issue,” Slavov said, “and I think anything that can move this issue into the public’s discussion today can be helpful. I understand how folks might feel burned out by commissions in the past. They’ve come up with great recommendations that have been ignored.” Slavov suggested that if a new commission is created it should try to educate citizens about the trade-offs. “you’d want a range of viewpoints and values to be represented on this commission. You want some experts, some policymakers, and some people representing just ordinary citizens.”
Referencing a survey that provided individuals budget options and a deficit reduction target, Slavov concluded that “You’re often asking questions in isolation. In the second round of the survey people were willing to make trade offs, but it needs to be presented in a way that engages them.”
Hear more on Facing the Future. Concord Coalition Executive Director Bob Bixby hosts the program each week on WKXL in Concord N.H., and it is also available via podcast. Join us as The Concord Coalition team discusses issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.
