Yesterday’s weekend interview in the Wall Street Journal with money manager Stanley Druckenmiller, “How Washington Really Redistributes Income”, vividly illustrates how disastrous Obama economic policy has been for the young people who form the core of his coalition.  “High unemployment is paired with exploding debt that they will have to finance whenever they eventually find jobs.”
“I thought that tying Obama Care to the debt ceiling was nutty”, says Mr. Druckenmiller. “I did not think it would be nutty to tie entitlements to the debt ceiling because there’s a massive long term problem.  And this president, despite what he says, has shown time and time again that he needs a gun at his head to negotiate in good faith.”
How about the “rat through the python” theory which holds that the fiscal disaster will only be temporary while the baby-boom generation moves through the benefit pipeline and then entitlement costs will become bearable.  Unfortunately for taxpayers, “the debt accumulates while the rat’s going through the python,” so that by the 2030’s the debt and its enormous interest payments become bigger problems than entitlements.  “That’s where Greece was when it hit the skids”, he says.
What is Mr. Druckenmiller’s solution?  Raise taxes on dividends and capital gains up to ordinary income rates and eliminate corporate taxes all together.  This is justified because it ends double taxation of corporate profits.  But, in addition, the people who run the corporations would be more incentivized to invest the profits in growth and expansion.  Ending corporate taxation also ends crony capitalism and corporate welfare.  All of this would be “very, very good for growth which is a good part of the solution to the debt problem long-term.  You can’t do it without growth.”
Bottom line:  we urgently need to rein in entitlement spending but we also need smarter policies to grow the economy faster.  Young people ought to be totally on board with all of this.  When will they wake up and see the light?