David I. Walker

Document Type



Long-range Social Security and Medicare spending projections vastly exceed projected program revenues. If left unchecked, the resulting fiscal imbalance (estimated at $40 to $70 trillion in present value terms) would fall primarily on future generations. To avoid generational inequity, and perhaps fiscal meltdown, Professor Daniel N. Shaviro and others propose immediate fiscal austerity. This reply Commentary argues that near-term austerity is unlikely to play a significant role in overcoming the fiscal imbalance, which can be thought of as a balloon payment due in the mid-twenty-first century. Significant near-term fiscal austerity would eliminate the public debt and replace it with a public surplus. Political economy theory and U.S. public debt history suggest that this path is infeasible. This Commentary also stresses the importance of clisaggregating the "Social Security and Medicare" problems. Contrary to popular belief, Medicare is by far the larger problem, and the Medicare imbalance is driven by projected spending increases, outpacing overall economic growth indefinitely. These observations suggest that a focus on Medicare cost control, rather than revenue enhancement, is called for.