Business Week: Throw Malthus Off the Bus!
This is the opener in my week of optimistic posts. And it’s a good time to do it, given the multifaceted surge of pessimism. One branch of pessimism is environmental/natural resources. This morning we had Paul Krugman writing a column entitled “Running Out of Planet to Exploit” where he talked about the soaring price of food, oil, and commodities, and the limits to growth. He ended the column by saying “Don’t look now, but the good times may have just stopped rolling.”
The second branch of pessimism, of course, comes from the financial crisis, which in my view is a reflection of the slow growth of real incomes for most households. Americans took on tons of debt to support a lifestyle which their incomes did not justify—an extra $3 trillion, by my calculations. Now Wall Street and the banking system is choking on all that debt.
The third branch of pessimism is demographic and budgetary. It comes from the aging of the industrial countries, and their continued inability to get medical costs under control. If current trends continue—which they can’t—then medical costs will eat up a larger and larger share of government budgets and indeed the whole economy. The latest long-term forecasts from the Congressional Budget Office call for Medicare and Medicaid to go from 4.1% of GDP today to 18.6% in 2082. These are all imaginary numbers, of course, but they are very worrisome to a lot of people.
As I go through the week, I will deal with each of these in turn, plus whatever else might come up. …
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