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Thursday, July 12, 2007
Morality Deficit
The evidence keeps piling up that budget deficits aren't increasing interest rates and aren't harming the economy. But deficits aren't just an economic problem- they're a moral problem, says economist Andrew Samwick:
Suppose for the sake of argument that deficits don't put much upward pressure on interest rates. Even in that case, they still have to be financed at the existing interest rate, and the burden of financing them has to be borne by someone in the future. Taxing someone in 2020 to pay for our spending binge in 2003 violates my notions of fairness, and that is a substantially more salient issue here than any additional concerns about efficiency.
Hold on there- that's a bit too simple. The fairness of deficit spending also depends on what we're borrowing the money for. At the same time future generations are paying our bills, we could be investing in their prosperity- i.e. education spending, R&D, public infrastructure. In that case they're just carrying their own weight.
Some deficit-financed spending doesn't help later generations much- think tax breaks for the wealthy. But on a deeper level, the unqualified assertion here is that generations of taxpayers ought to somehow be self-reliant. The current generation needs to provide for itself. Subsequent generations ought to do the same.
Not only does this way of thinking run counter to liberal traditions of reciprocity and altruism, it's part of a larger attack on federal insurance programs like Social Security and Medicare that depend on inter-generational transfer payments. In its more moralistic variety, it's the idea that greedy baby boomers need to be punished for taking too much in health care and retirement security. Toned down a bit, it's the idea that over the long-term, Social Security needs to be in constant balance.
It's essentially a more moderate way of looking at self-reliance. It's not necessarily the belief that individuals are on their own (though it might be). It's your generation that's on its own.
But generational self-reliance has nasty implications. If we can't make other generations pay some of our bills, we shouldn't buy them anything either. That means fewer investments in education, infrastructure, and R&D, especially when we won't see the immediate and full benefits of our investment. In fiscal policy, there is a thin line between self-reliance and selfishness.
Ultimately, generational selfishness isn't good for anyone. I mean, I can't believe I have to say this, but different generations will always depend on each other. This is a foundation of the family, the community, and governmental programs like Social Security and Medicare. It's worked out pretty well so far. And if we break the ties between generations in fiscal policy, we set a bad precedent that could come back to haunt us.
Posted by Matt Lewis
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