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I won’t call this a “response to a response to a response to a critique”–but just call it “my two cents” on the debate over IOUSA that’s taken place here over the past few days.  Having read over the initial critique and the back and forth here and in response to Dean Baker’s post on Huffington Post, I don’t want to be reflexively argumentative, but calmly observant. 

Perhaps I’m being naive, but I don’t see a lot of disagreement on the substance of the issue.  Without getting into the weeds, here’s what I interpret as what I think all of us actually agree on:

• Rising health care costs present the biggest challenge to the longer-term fiscal and economic outlook, because the per-person costs of health spending (both public and private spending) are growing faster than the economy, and that factor compounds with the changing demographics (of larger retiree-to-worker population).  (And we can all agree on the same sources for our facts–such as CBO projections.)
• Rising health costs are an economy-wide problem, not just specific to the health spending done through federal entitlement programs.
• Such severe upward pressure on health spending throughout the economy means that in both the public and the private sector, the ability to save more to avoid unsustainable increases in debt (public and private) is severely challenged–i.e., rising health expenditures, all else constant, will reduce national saving.
• Given that rising health costs will continue to reduce national saving if policies are not changed, economic growth will be jeopardized if policies are not changed.
• The statement that economic growth is threatened by reduced public and private saving is not a claim that the dollar-size of the economy in the future will be smaller than the economy of today (the economy will still grow over the longer run), but a claim that it will be smaller than it would otherwise be if the imbalances were reduced and hence national saving higher.  The intergenerational fairness issue is whether future generations should be entitled to the same rate of growth in the economy that current and prior generations have enjoyed.  (See my “Buffett pie” post on this issue, and here too, and here in this Concord issue brief.)
• Policymakers need to do all we can to “bend (down) the curve” on overall health care spending, while ensuring adequate (and hopefully better-quality) health care to all Americans, but…
• If after all we try to do to control health costs we’re still swimming upstream (i.e., still contending with health care spending rising faster than the economy is growing), then we’ll still be “living beyond our means” (in the economy overall, not just specifically within our entitlement programs).  (This is the “basic math” problem that counters the argument that it’s a spending problem so it’s that same spending that we should attack/cut.) 
• We then need to consider other policy options to help us either spend less (decrease our “ways”) or earn more (increase our “means”).  That’s why we have to be willing to reexamine the entire federal budget to get public saving up (dissaving down), and why we also have to consider how federal policy influences private saving.  We need to consider reform of the federal entitlement programs, yes, but also improving efficiency in government spending more broadly, and tax reform.
• The sooner we work on the variety of ways we can start living within our means, the sooner we are able to bend down the overall curve of total government spending, and indeed economy-wide spending, because we reduce the costs of debt service (compounding interest).

The bottom line is that in my view, the Dean Bakers of the world don’t dispute the facts or forecasted trends that the IOUSA folks highlight; we’re all looking at the same ones, and we often even use the same words to describe what we see.  The Dean Bakers of the world are not questioning the analyses of the fiscal hawks–they’re questioning our motives….even the motives of someone like me who’s speaking as an economist mom.  If they don’t trust our policy intentions, there’s no point in us fiscal hawks getting into debates with them about the details of our respective assumptions and analyses, because those details have nothing to do with why they dislike us. 

Call me naive, but I’m hopeful that going forward and working with the next Administration and the next Congress, that the Dean Baker-type critics of the fiscal hawks will start to realize that there’s actually a lot of common ground between us, and not so much “one side” versus “the other.”