Niall Ferguson (author of Colossus: The Rise and Fall of the American Empire) and Laurence Kotlikoff (co-author of The Coming Generational Storm)
propose a ?new New Deal? in the New Republic with today?s date.
Ferguson and Kotlikoff start well enough; showing that the financial
situation for Social Security and Medicare is even worse than the
president says, and much worse than Democrats will acknowledge.
Unfortunately they distort first the conclusions of Kent Smetters and
Jagadeesh Gokhale then personal savings accounts to reach their
conclusions.
The NND has three components: 1) a federal retail sales tax,
FRST, which others call the ?fair tax,? of 33% in lieu of all income
and FICA taxes; 2) personal Social Security accounts with mandatory
contributions of 7.15% to be administered by SSA uniformly for all
citizens; and 3) vouchers for all Americans to purchase health
insurance through a universal Medical Security System, MSS.
Ferguson and Kotlikoff move in a limited way to markets with
their new New Deal, but even they admit that the 33% sales tax would
boost federal revenues to 21% of GDP from 16% now. They claim that this
31% tax increase would have no serious macroeconomic effects, and that
they would be able to cut 20% of discretionary spending.
