We once again have a warning that details the fiscal precariousness of Medicare and Social Security. According to new annual reports from trustees of those programs, Social Security will be insolvent by 2035 (current and near-retirees will face a 21 percent benefit cut) and Medicare by 2036 (Medicare payments risk an 11 percent cut). Since the federal pension and health insurance programs are a massive part of what Washington does, one might expect the presidential campaign season would include a serious discussion of how to put them on a sustainable fiscal track. 

But that’s hardly a sure thing. Here’s Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

As we head into peak campaign season, it is our job as Americans and the voting public to ensure that we demand President Biden and President Trump present us with a realistic, detailed plan to avert trust fund insolvency. And they need to work with Congress to implement a plan.

But why stop there? How about a broader discussion about America’s deficits and debt. After all, the numbers are getting pretty ugly. A few stats from The Economist:

• In 1992, America’s net debt was 46 percent of GDP. Today it has reached 96 percent of GDP and is headed to 166 percent over the next 30 years, according to CBO.
• The federal deficit has averaged nine percent of GDP per year over the past five years, and is nearly twice the average of other rich economies.
• Interest payment will make up two-thirds of the deficit every year versus one third in the two decades before COVID.

As compelling as those numbers are, the smart baseline case here is to expect no action—well, at least until markets decide they want action. Again, The Economist:

As the scale of Treasury auctions grows ever more daunting, the chance of turbulence rises. As happened last autumn, demand may fall short unless the government offers higher yields. That would send tremors through markets. Paul Winfree, a budget adviser in Mr Trump’s White House, thinks it might take such a disturbance to shake Washington out of its slumber. “The Treasury would come to Congress and say, ‘You need to send out a credible signal to markets that you are committed to doing something on the deficit,’” says Mr Winfree. “And then they would act.”

The recent upturn in labor productivity has some analysts recalling the macro conditions of the 1990s. But maybe there’s something else about that decade that should also come to mind: bond market vigilantes.

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