January 03, 2012
Dean Baker
The Guardian Unlimited, January 3, 2012
See article on original website
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’ 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 U.S. 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 U.S. 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 U.S. 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.
