Can this idealized outcome be achieved? Can we have our cake and eat it too? The answer is yes: What is required is that the so-called “supply curve” of health care services shifts out to the right faster than the demand curve does. It can be shown formally (and is in an Appendix) that policies insuring this outcome will remarkably increase the supply of health care (matching increased demand) and drive total expenditure down as a share of GDP. It is also proven that this is the only way in which this outcome can be achieved. In the book, there is a significant discussion of exactly how to drive the supply curve outward at a much faster rate than in the past.

But such hawks may be wrong in their diagnosis. Suppose that the funds are being borrowed for productive infrastructure investment — projects like the interstate highway system that more than paid for themselves over time. Not just infrastructure investment (“roads to both somewhere and nowhere”), but productive investment (“roads to somewhere” only).  In this case, no additional debt is accumulated at all as a result of increased borrowing. Indeed, the high return on such projects will end up lowering the debt burden on the children in the long run. On the other hand, increased borrowing to fund transfer programs will not generate healthy returns on investment as there is in effect no investment. This, this form of borrowing will increase the burden on the children, and the fears of deficit hawks are well justified. In short, there are good and bad deficits — the distinction depending upon whether the borrowed funds are spent productively or unproductively.