Former Reagan Economic Advisor and current George F. Baker Professor of Economics at Harvard University Martin Feldstein weighed in on concerns about the deficit and the state of the U.S. economy and job market.
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Feldstein described what the $600 billion deficit for 2016 means for individual Americans and their families.
“Well it is very important, you know, you said $600 billion and that’s the official number, that’s $2,000 per person… a family of four and that’s $8,000. That’s not the debt, that’s the increased debt this year alone, that’s the extra amount that the government is borrowing. We can’t go on like that,” Feldstein told the FOX Business Network’s Maria Bartiromo.
Feldstein then explained why entitlement reform is the solution to dealing with the deficit.
“And the only way to deal with it is to slow the growth of the entitlements. We’re on a path in which defense spending is going to go down to the lowest share of GDP we’ve had since World War II. Same is going to be true for non-defense, annually appropriated spending, 2.5% of GDP, so we’re not going to solve this problem by going after either defense or all the myriad of little annually appropriated programs.”
Feldstein had a positive assessment of the economy despite his concerns about the deficit.
“The U.S. economy is in good shape actually, despite all this. There’s more uncertainty, there’s more to worry about but I would say we’re in good shape. The main thing I keep looking at is what’s happening to labor markets and to personal income and to spending. You see households are continuing to increase their spending.”
Feldstein responded to Hillary Clinton’s and Donald Trump’s debate over how much to spend on infrastructure in an effort to boost the U.S. economy and job growth.
“We don't need an infrastructure program to stimulate the economy. There may be a lot of infrastructure that would benefit from new spending, but if we do that then we have to deal with the out year deficits.”
Because of this, Feldstein proposed that any government spending on infrastructure would have to be balanced with plans to slow the pace of growth of entitlements to curb its impact on the long-term debt.
“So any plan that I would like, any plan that a conservative economist would like would have to combine whatever spending we do in the short run with plans to slow the growth of entitlements so that the long-term debt isn’t on the kind of wild rate-rising path that the Congressional Budget Office is warning us about.”
Feldstein then weighed in on the state of the U.S. job market.
“To me, the key thing to look at is what’s happening in the labor market. We’ll get another number on Friday, but I think there’s every reason to think we’re going to continue to have a pretty tight labor market.”