OUR REAL BEQUEST TO THE FUTURE.
Deficit hawks try to scare us about the debt we're leaving. That's economic nonsense – unlike the costs of global warming
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Thailand was recently hit by the worst flooding the country has seen in 50 years. Photograph: Chaiwat Subprasom/Reuters
It is remarkable how efforts to reduce the government deficit/debt are often portrayed as a generational issue, while efforts to reduce global warming are almost never framed in this way. This contrast is striking because the issues involved in reducing the deficit or debt have little direct relevance to distribution between generations, whereas global warming is almost entirely a question of distribution between generations.
Seeing the debt as an issue between generations is wrong in almost every dimension. The idea that future generations will somehow be stuck with some huge tab in the form of the national debt suffers from the simple logical problem that we are all going to die. At some point, everyone who owns the debt being issued today, or over the next two decades, will be dead. They will have to pass the ownership of the debt to someone else – in other words, their children or grandchildren. This means that the debt is not money that our children and grandchildren will be paying to someone else. It is money that they will be paying to themselves.
There are certainly issues of intra-generational distribution. If Bill Gates's grandkids own all the debt, then there will be a serious issue of income inequality 50 or 60 years out – but that is not an intra-generational issue.
Of course, some of this debt will be owned by foreigners. The interest and principle payments by our grandchildren will make the country as a whole poorer. However, the foreign ownership of US financial assets, including government debt, is determined by our trade deficit, not our budget deficit.
Those who proclaim themselves concerned that our grandchildren will be stuck making huge payments to the Chinese or other foreigners should be focused on reducing the value of the dollar. A more competitively priced dollar will be the key to getting our trade deficit closer to balance and reducing the outflow of dollars each year that are used to buy up US financial assets.
The main factor that will determine the economic wellbeing of our children and grandchildren will be the strength of the economy that we pass down to them. This will depend, in turn, on the quality of the capital and infrastructure we pass onto them, along with the level of education we give them, the state of technical knowledge we achieve and the state of the natural environment.
If we cut the deficit by making spending cuts that affect our progress in these areas, we will be making our children worse-off, not better-off. Of course, leaving their parents unemployed for long periods of time will not improve our children's wellbeing either.
If the deficit has little to with the wellbeing of our children and grandchildren, global warming has everything to do with it. We run the risk of handing them a planet without many of the fascinating features that we had the opportunity to enjoy (for example, coral reefs that are dying, plant and animal species that are becoming extinct, landscapes that are being transformed). Far more seriously, we face the likelihood of handing them a planet in which hundreds of millions of people risk death by starvation due to drought in central Africa, or through floodingin Bangladesh and other densely populated low-lying areas in Asia, as a result of human caused global warming.
The guiding philosophy on this issue in the United States is pretty much that we can inflict whatever harm we want on people elsewhere in the world because we are powerful and they are not. This is certainly true today, but will it still be true 60 or 70 years from now? Do we expect that the United States will still be able to act unilaterally without regard to the consequences that our actions have on the rest of the world?
Before anyone tries to answer this question, they should consider that the International Monetary Fund's projections show China's economy surpassing the US economy before the end of the next presidential term. And China is not the only country whose growth is substantially outpacing ours.
The point is not that we should worry about an invasion from hostile powers, but instead, that we should not imagine that we will be able to inflict great harm on the rest of the world with impunity. In other words, our children and grandchildren may well be forced to pay a substantial price for the damage caused by our greenhouse gas emissions today.
Those who want to worry about questions of generational equity might start to wrap their heads around combating global warming. Global warming threatens to do far more damage to the wellbeing of future generations than the social security and Medicare benefits going to baby-boomers, no matter how much the deficit hawks try to twist the numbers to claim otherwise.
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