8-14-24 *INTERVIEW* Dan Mitchell of the Center for Freedom and Prosperity on Entitlements

Episode Transcript

Speaker 1 (00:00):
Listeners who've been listening to me for a while know
that when it comes to government policy, especially long run,
there's nothing that has made me more upset than the
absolute failure by politicians, meaning presidents and members of Congress
in both parties, to do anything important to control our

(00:25):
deficit and our national debt. And I know it sounds trite,
but I've got two kids, teenagers, and I think about
what's going to be left for them. What are their
opportunities going to be in the United States of America.

Speaker 2 (00:40):
Are they going to be able to make a living?

Speaker 1 (00:42):
Is the government going to have to steal it all
in taxes because of what they're doing now with the
debt and deficit. And it's just been, it's been, I
don't use this word lightly, a sin, what these politicians
are doing to this country. Joining me to talk about
not just what the problem is, but maybe so impossible solutions,
and we're going to delve into the economics and the politics.

(01:05):
My good friend Dan Mitchell, I've known Dan for decades.
Knew him at first when he was at Cato, but
he was also at Heritage and he is the former
economist for the Senate Finance Committee, and now he's the
co founder and the big mcgilla at the Center for
Freedom and Prosperity, and he writes a fantastic blog called

(01:26):
International Liberty where he writes pretty much every day and
it's absolutely free and you will learn so much. So
if you just type in Dan Mitchell blog you'll find it.
In any case, Dan's recent piece the entitlement disaster that
Kamala Harris and Donald Trump are ignoring.

Speaker 2 (01:41):
It's a multi part thing. Anyway.

Speaker 1 (01:42):
With that overly long introduction, Dan, it's really good to see.
Thanks for making time for us.

Speaker 3 (01:48):
Oh glad to be talking to you. Ross.

Speaker 2 (01:50):
Why don't we start with your describing the magnitude of.

Speaker 1 (01:54):
The problem and why it's important or whether I'm overestimating
how important it is.

Speaker 4 (02:01):
You're exactly right that there's a problem. I would phrase
it a little differently than you. The problem isn't the
deficits and the debt that's the symptom of the problem.
The problem is that government is growing bigger and bigger.
And why is that happening? Because we have these poorly
designed and tournement programs combined with an aging population and

(02:22):
a falling birth rate.

Speaker 3 (02:24):
Now, I'm not a big fan of government spending.

Speaker 4 (02:27):
But if you have a traditional population pyramid with only
a few old people and lots and lots of children,
so that there's always a new generation of workers to
pay for old people, you could do traditional entitlements and.

Speaker 3 (02:40):
The math would work.

Speaker 4 (02:41):
The math doesn't work anymore, and so over the next
two to three decades, you're talking about a huge increase
in the burden of government spending, which is going to
lead to this giant increase in government debt that you
were talking about. And I not only do I have children,
grandchild and maybe more in the future, who knows. I

(03:03):
worry about the future too. And I think that politicians
are being not just reckless, I think that, if we
use the term properly, they're being unpatriotic because a lot
of them know that there is a problem, and they're
deliberately saying my personal political ambition is more important than
the long run interest of the country. And I think

(03:24):
that's just awful that some of them think that way.

Speaker 1 (03:27):
I absolutely accept your clarification, and I think Milton Friedman
made a similar point that the burden of government should
not be measured by the deficit. Let's say the burden
of government should be measured by government spending because you
can offset the deficit by stealing more of other people's
money and lowering people's quality of life and all this stuff.

Speaker 2 (03:45):
So government spending is really the thing.

Speaker 1 (03:47):
But let's stick in our conversation now with what you're
talking about in your article, because there's all kinds of
government spending, but let's focus on entitlements.

Speaker 2 (03:56):
So just give us a little.

Speaker 1 (03:58):
Bit of a sense of the path that let's talk about.
Social Security and medicare the path that they're on, and
how you know, normal people should think about this.

Speaker 4 (04:09):
The most important thing to understand is that when social
Security was first created, there were lots and lots and
lots of workers and very few retirees. And even thirty
years later when Medicare was created, there were a lot
more workers than there were old people.

Speaker 3 (04:25):
That has changed.

Speaker 4 (04:27):
The demographics have made it so that we cannot continue
on the current path.

Speaker 3 (04:32):
Now, what are.

Speaker 4 (04:33):
Politicians going to do about it? Absolutely nothing. They are
figuratively sticking their heads in the sand, figuring that well,
the Social Security Trust Fund, which by the way, is
a joke, it's nothing but IOUs.

Speaker 3 (04:46):
But you know, to the extent that you care about
the trust fund.

Speaker 4 (04:49):
That goes belly up early next decade for Social Security,
same thing with Medicare. When that happens, there will be
automatic budget cuts. Now will politicians allow.

Speaker 3 (04:59):
That to happen.

Speaker 4 (05:01):
They'll probably just pass a law saying, oh whatever, just
you know, subsidize it out of general revenue.

Speaker 3 (05:05):
And just borrow more and more money.

Speaker 4 (05:08):
What I wrote my book that we talked about several
months ago on your show. I started it with a
description of imagine that you lived in Greece in two
thousand and five. Your life seemed pretty good, you had
joined the Euro, interest rates came down, it seemed like
the economy was in good shape. Within five years, you
were suffering an economic cataclysm worse than the Great Depression.

(05:30):
Why because eventually they couldn't keep the Ponzi scheme going.

Speaker 3 (05:36):
There was a FIS book collapse. And at some point
that's going to happen in the United States. Now.

Speaker 4 (05:40):
I don't think it'll happen in the next two or
three years, but economists are allowsing making forecasts and predictions.

Speaker 3 (05:46):
All I know is that it will happen.

Speaker 4 (05:48):
Terrible things will happen to our country, to ourselves, to
our children, and our grandchildren if we continue down this
current path.

Speaker 1 (05:57):
Okay, so I agree with you, but I'm gonna play
Devil's advocate just for a little intellectual honesty here. There
are folks out there who believe in something called MMT
that I think is nonsense. But in any case, and
a lot of Democrats have ascribed themselves have signed on
to this MMT, probably more for political purposes than understanding economics.

(06:20):
But their argument is that the debt and deficit don't
really matter that much if it's in your own currency
and you can just print your own money.

Speaker 2 (06:32):
Greece didn't have.

Speaker 1 (06:33):
That ability to print its own money because it's in
the Euro and they weren't in charge.

Speaker 2 (06:37):
And so I think you would have people on the left.

Speaker 1 (06:39):
Say, well, Dan, if you were right that are dead
is a problem, then don't you think it would have
become a problem A long time ago.

Speaker 2 (06:48):
You've been warning us.

Speaker 1 (06:49):
I don't mean you, Dan, but bought you and lots
of others have said this is a huge problem. It's
kind of like Al Gore telling us the world's going
to come to an end twenty years ago. We said
we had ten years, right, and here we are, So why.

Speaker 2 (07:04):
Shouldn't we take you seriously.

Speaker 4 (07:07):
I'm going to agree in a tiny way with some
of those people because the United States has what's called
the world's reserve currency. That means we have a lot
more leeway to go into debt than other countries. But
their argument that Greece got in trouble because it didn't
have its own currency, well what about Venezuela. It has
its own currency, it got into trouble. Zimbabwe had its

(07:30):
own currency, it got into trouble. Sri Lanka has its
own currency, it got into trouble. Turkey has its own currency.
It got into trouble. Argentina has its own currency, it
got into trouble. Hopefully the new president, who's a libertarian,
is now solving those problems. But the point is is
that that modern monetary theory people are completely wrong. You

(07:50):
can have your own currency, you can print lots of
that currency, but guess what you wind up still at
the end of the day with inflation and fiscal collapse. Now,
because we have this extraordinary position of having the world's
reserve currency, we have more leeway. So I think France
goes belly up before we do. I think Japan goes

(08:12):
belly up before we do, but who cares whether we're
the last domino to fall?

Speaker 3 (08:17):
Why do we want to be a domino?

Speaker 4 (08:19):
Why do we want to engage in fiscal irresponsibility. Why
do we want to let the burden of government spending
increase when there's so much evidence around the world that
that translates into slower growth and economic stagnation. We want
to be copying the countries that are doing the right things,
like Singapore and Sweden.

Speaker 3 (08:36):
We don't want to be copying Italy and Greece.

Speaker 1 (08:39):
So when you say Japanil go belly up, or France
and eventually US, what does that mean? What does belly
up look like?

Speaker 4 (08:46):
Belly up means that you have a fiscal crisis, which
is which I guess the best definition. It's when investors
no longer trust a government and they won't buy the
government's bonds anymore.

Speaker 3 (08:58):
And that's exactly what happened in Greece.

Speaker 4 (09:00):
All of a sudden, everyone said, wait, even though they're
in the Euro and they don't have inflation anymore, we
still have to look at the fact that this government
can't pay back anything that we lend them because they
have such a huge burden of government spending. So little
growth that they can't generate tax revenues. And that's what's happened.
It's happened at times in other countries around the world.

(09:23):
It's happened, you know, as recently as the Great Depression,
with a couple of United with a couple of states
here in America. Now, higher taxes aren't the solution because
you still might wind up in the same situation. You
can borrow and borrow and borrow and spend, and you
sort of maybe have a sugar high in your economy,
but when the fiscal crisis hits all of a sudden,

(09:45):
your GDP drops twenty percent. But if you do the
tax and spend route, your economy grows much slower, and
then you probably still wind up in the exact same
space economically twenty years down the road. And again, what
does that tell us. The problem is government spending, not
how it's financed. Whether you print money to finance government.

Speaker 3 (10:05):
That's bad.

Speaker 4 (10:06):
Whether you raise taxes to finance government spending, that's bad.
And of course you can just borrow money to finance government,
that's bad. You always wind up in a bad place
when you have government growing faster than your economy's productive sector.

Speaker 1 (10:20):
All right, so this is kind of probably like trying
to choose between cancer and a heart attack. But based
on what you just said, it sounds to me like
it's marginally better, though still bad, to finance growing government
by taxing now rather than creating a huge national debt.

Speaker 2 (10:39):
Or is that wrong or situation dependent?

Speaker 3 (10:43):
I guess it's situation dependent.

Speaker 4 (10:44):
Probably the worst way to finance government is with the
printing press. That that's why the modern monetary theory people
are such cranks, and traditional left leaning economists like Larry
Summers openly condemned them for their bizarre theories. Is just
a it's a crank theory that a few crazy politicians

(11:05):
like Alexandria Kazio Cortez and Bernie Sanders have a subscribe to,
but very few serious people give it any any credibility.

Speaker 3 (11:16):
So that leaves us with two other ways of financing government.

Speaker 4 (11:19):
Do you borrow money to finance government or do you
tax the finance government? And I guess I view them
your analogy is perfect. It's like choosing between heart attacking cancer.
They're both bad that you probably wind up maybe if
you're only going to live three years, Borrowing.

Speaker 3 (11:37):
Is probably going to give you better results.

Speaker 4 (11:40):
But if you're going to live thirty years, borrowing eventually
is going to give you that fiscal crisis where your
economy is going to crash down to where you would
be if you had a tax and spend approach, Which
is why the only good answer is to have a
spending restraint strategy. And that's why I'm such a big
fan of Switzerland with their spending cap or for that matter,
even though the politicians have eroded it some. You know,

(12:02):
what you have in Colorado with the taxpayer bill of rates,
it's certainly better than any of the fiscal rules in
the other forty nine states. You want politicians to have
handcuffs on. You want to tell them you can only
increase spending by a certain amount each year, and that
forces them to engage in trade offs. And you know,
and on the national level, what's the trade off between

(12:23):
National defense and the Department of Education. What's the trade
off between Social Security and medicaid, what's the trade off
between having the federal government subsidized local infrastructure.

Speaker 3 (12:33):
And you know, out the Department of Housing and Urban Development.

Speaker 4 (12:37):
Nobody makes those trade offs now because we just assume
we're not wait, but the politicians in Washington, both parties
just as say, hey, we're going to get past the
next election and get re elected if we just keep
spending money hand over a fifth. But again that's unpatriotic
in the proper sense of are you doing what's best
for America.

Speaker 1 (12:58):
We're talking with Dan Mitchell, founder of the Center for
Freedom and Prosperity. Freedomanprosperity dot org is the website. Okay,
let's do a couple more minutes on this. So, doctor Dan,
you've diagnosed the disease. What's the treatment.

Speaker 3 (13:14):
The treatment is, we have to reform the entitlement.

Speaker 4 (13:16):
Well, first we have to cap you overall level of
government spending and force the politicians to make the trade offs.
And when they make those trade offs, there's no escaping
the fact that the driving problem overwhelmingly, you know, ninety
percent of our fiscal problems. It's not the defense budget.
It's not even domestic discretionary, even though I want to

(13:36):
shut down the Department of Education, you know, the Department
of Housing and Urban Development and things like that. I mean,
that's a given. But what's driving our long run fiscal
problem are the entitlement programs. The big three are social Security, Medicare,
and Medicaid. The good news though, when you're asking about solutions.
Just ten years ago, Republicans in Congress were voting for

(13:58):
the Ryan Budget, and the Ryan budget included block renting
Medicaid and modernizing Medicare into a premium support system sort
of like what federal government workers have for their healthcare benefits.
Those two changes would have been enormous in the long run.
And by the way, the health entitlements are a bigger
problem than Social Security, so fixing the health entitlements is

(14:20):
the number one priority. Republicans, just as recently as ten
years ago, were good on the issue, but then Trump
came along, and trankly know, whether you love him or
hate him, he's a big spending populist and Republicans that
buy and large given up on entitlement reform, or at
least there's no way it's going.

Speaker 3 (14:38):
To happen with Trump in charge.

Speaker 4 (14:40):
Republicans need to go back to being a party of Reagan,
not a party of big government populism.

Speaker 1 (14:46):
Yeah, I mean, I've said again there are some things
about Trump I like and some things about Trump that
I don't like.

Speaker 2 (14:51):
But his single biggest failure.

Speaker 1 (14:54):
In domestic policy was his lack of care about government spending.
And he I remember the first time he ran, he
and Mike Huckabee were the two candidates who ran on
explicit platforms of not reforming entitlements, which I thought was
was really interesting.

Speaker 2 (15:11):
So, all right, we've got about one monament left here,
dan Uh.

Speaker 1 (15:16):
I keep thinking about how these things are going to
blow up, And I keep thinking about the fact that my.

Speaker 2 (15:22):
Son's middle name is rand And some of the answers.

Speaker 1 (15:26):
You know, like the treatments that doctor Dan would recommend
for our economic disease, are not actually that complicated to understand.
They're pretty basic, you know, And and yet we're not
doing them. And I wonder if you think that the
nature of American politics right now is such that nothing

(15:47):
will be done until we see our economic blood in
the streets.

Speaker 4 (15:53):
I certainly don't have any optimism that something good will
happen in the next four years. As a matter of fact,
I could easily see new and title it's getting created,
in other words, digging the hole deeper. But here's where
there might be a chance to do something. We already
talked about the fact that these fake trust funds ran
out of money early next decade. That will probably be

(16:14):
an action forcing event. So if there happened to be,
if Republicans, for some by some miracle, go back to
being a responsible Reagan small government.

Speaker 3 (16:23):
Party, just like in the early nineteen eighties.

Speaker 4 (16:26):
Back then when the Social Security Trust Fund ran out
of money and they did some reforms that actually strengthened
the program's finances in the long run, we may have
another chance. Assuming that there's a responsible and patriotic president,
and assuming they are serious and intelligent people in Congress,
we might actually have a chance to save everything. So

(16:48):
you know, I'm not buying a house in Panama yet
and looking to escape. I don't think. I don't think
the situation is hopeless at all.

Speaker 1 (16:57):
Dan Mitchell is co founder of the Center for Freedomanprosperity.
Freedomanprosperity dot org is that website, and I strongly encourage you.
If you just type in Dan mitchell blog, you will
find his blog. It's called International Liberty over Towards the
Right Side.

Speaker 2 (17:12):
You can sign up. It's free.

Speaker 1 (17:14):
Dan Wright's pretty much every day in plain English that
you and I can understand about important economic topics. You
will learn a lot, You will be better for it.
Dan Mitchell, it's great to see you. Maybe I'll see
you at the Steamboat Institute event next weekend. Folks Steamboat
Institute dot org if you want to see all the
great speakers there next weekend.

Speaker 2 (17:32):
Thanks for being here, my friend, appreciate it all right,
See you, lady Ross