When interest rates and inflation were low, it seemed politicians had all the time in the world to deal with entitlements. Now politicians who chose to ignore Social Security’s financing issues appear to be banking on a return to low rates and negligible inflation.
Anyone who is concerned about entitlements and debt has been screaming into the wind for decades. But as the current environment has shown, the future is uncertain. The same people who dismissed inflation also don’t think the U.S. government will ever face constraints on its borrowing. The inflation adjustment this week should act as a warning that this is a serious risk, and now is the time to deal with it.
Allison Schrager is a Bloomberg Opinion columnist covering economics. A senior fellow at the Manhattan Institute, she is author of An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk.