Budget
balancers and global warmers
by Dean
Baker
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, aka 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 principal 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 well-being 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
that we pass onto them, along with the level of education that we
give them, the state of technical knowledge that 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 well-being either.
If the deficit has little
to with the well-being of our children and grandchildren, global
warming has everything to do with their well-being. We run the risk
of handing them a planet without many of the fascinating features
that we had the opportunity to enjoy (e.g. 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 flooding in 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 we also
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 combatting global warming. Global warming threatens to
do far more damage to the well-being 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.
Dean
Baker is the co-director of the Center for Economic and Policy
Research (CEPR). He is the author of The End of Loser Liberalism:
Making Markets Progressive. He also has a blog, "Beat the
Press," where he discusses the media's coverage of economic
issues.
