Max Sawicky, at maxspeak.org, begs to differ with my previous post claiming it is misguided to focus on the deficit in the debate on social security reform. (You can also find his comment here). He seems to be concerned about the wisdom of borrowing on speculation of future gains.
Haven't we heard in the past that some current added borrowing will pay for itself with some gain in the future?
Well, sure, but I wasn't arguing that all deficits are irrelevant. Quite the opposite. What I was trying to say was that a particular deficit can be judged only by the spending and tax policies that it represents. It seems to me deficits that that do little more than translate promised future payments into explicit promissory notes -- something akin to Chilean recognition bonds, for example -- change absolutely nothing.
Time inconsistency is, of course, a serious issue. (As recognized in the awarding of this year's Nobel prize in economics.) Healthy skepticism about government borrowing today, backed by the promise to take specific actions in the future, is just plain sensible. But in the case of social security reform, those future actions will almost certainly be associated with not delivering public benefits that would otherwise require more borrowing or taxation to finance. That seems like an easy promise to keep.
(If you just can't get enough of this, surf on over to Vox Baby and Angry Bear.)
UPDATE: Andrew has a much more extensive response here.