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Solutions for developed economies (general discussion)



1995 Symposium Proceedings BUDGET DEFICITS AND DEBT: ISSUES AND OPTIONS General Discussion: Solutions for Developed Economies Chairman: Jacob Frenkel Mr. Frenkel: Thank you very much for reminding us that there are only two answers: The right answer and the wrong answer. Reminds me of the brilliant speech by Vaclav Klaus given at this conference a few years ago which stated there are only two ways: The right way and the wrong way; and anyone who looks for the third way is bound to end up on the way to the Third World. I would like to open the floor now to a brief discussion. Mr. Wojnilower: Many of the speakers have pointed out that in twenty years or so there will be a severe shock, as the elderly exert a substantially larger claim on our resources. The shock will be severe, no matter how the elderly try to collect this claim—whether as parents from our own children, as voters from public budgets or, as sellers of accumulated financial assets, from other private savers. It is misleading to convey the idea that this confrontation can be financially finessed in advance. And it is damaging to discuss these issues in the context of the current budget debate. There may be good reasons to reduce the budget deficit, but doing so would have no relevance to and will have no positive effect on the future intergen- erational problem which has dominated this conference. For a moment, I hoped that Pete Peterson’s Charts 1-5 were going to lead to a discussion of the true issues—actually the issues of life 295 and death. How can we limit the benefits afforded by the current system and the entitlement expectations we hold for the future? But then his focus veered toward trying to establish a new fund, or saving the existing fund, which would be of no help in providing the real resources the elderly will demand when the time comes. It confuses the issues to try to deal with these matters in the context of the budget. Both the defunct Clinton health plan and the current Republican Med

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