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Unfunded Promises

Ananth Seshadri says that the debt ceiling debate is a dramatic distraction from the real issue surrounding the national debt: will we be able to pay for he promises we’ve made?

UW professor Ananth Seshadri uses a couple of words to describe the recent political confrontation over the federal debt ceiling: drama and brinksmanship. But he might also add a third: distraction. Seshadri is the Mary Sue and Mike Shannon Distinguished Professor of Economics, and in his estimation, the prolonged — and increasingly frequent — debates between Congress and the White House about whether the government should pay its bills tend to conceal or even exacerbate the real issue created by mounting future deficits. In programs such as Social Security and Medicare, the U.S. government has made promises, and at some point in the next decade, it will have trouble keeping up those promises.

My chief area of research is:

I study macroeconomics and public finance. I have written on the causes and consequences of demographic change; the effects of technological change in accounting for various demographic patterns; and the adequacy of retirement savings and on policies that promote equality of opportunity. I’ve been the chair of the department in economics for most of the last decade. In addition, I’m codirector of the Center for Research on the Wisconsin Economy, or CROWE.

Tonight on The UW Now Livestream, I’ll talk about:

I’ll talk about some trends in the U.S. economy, trends in economic growth, interest rates, spending, and revenue, and about how debts and deficits have evolved over time. We’ll talk a little bit about the unnecessary theater surrounding the debt ceiling that we saw over the last few weeks, which we all hoped would foster a conversation on the real issue, which is that we have entitlements — promises that we made. But Social Security, Medicare and Medicaid, they’re all slated to become run out of money sooner than later. There’s got to be give and take on both sides, and it is well past time we started having a serious conversation about that. We need to get serious about policies that will foster long term economic growth.

The one thing I want viewers to remember is:

The brinksmanship is unnecessary political theater. I find it rather ironic because (at best) it is designed to foster a conversation about getting our fiscal house in order, but it has the effect of potentially raising interest rates if markets get nervous, which then adversely affects our ability to pay back our debt. We have a long-term debt problem which warrants a return to fiscal discipline.

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