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Ideological Blindspots (part II): The Grandchildren

March 29, 2017

Liberals and conservatives tend to take sharply divergent views of two major issues: global climate change and the looming national debt. But they share one attribute in common. Both sides believe that by focusing on the issue that most concerns them, they, unlike their opponents, are protecting the interests of their children, grandchildren, and great grandchildren. Caring about our progeny demands attending to both issues, and also to understanding how they interrelate. 

 

Conservatives point out the looming national debt, which, as I write, is hovering at just shy of $20 trillion dollars. See http://www.usdebtclock.org. The federal deficit is hovering at $591 billion. To understand what this means, we need to clarify some terminology. 

 

It is important not to confuse the national debt with total US debt. The latter includes all state, local, and private debt, the first of which is ameliorated by constitutional balanced budget requirements in most states. The deficit is the annual shortfall between government revenues and expenditures. As with your personal checking account, if your earnings fail to meet your expenses, you go into the red. Consider what happens with a monthly personal deficit. You can borrow to pay it, for example, with a home equity loan or by financing other expenditures on a credit card. If you have a structural deficit, meaning that each month you project a shortfall, then your monthly deficit augments your growing debt. So it is with the federal government. Although we often focus on the deficit, the deficit really matters as an accretion to the national debt. What really matters is whether the national debt is continuing to grow, remains stable, or is shrinking over time. That is because the service on that debt, meaning the interest paid to sustain it (like interest paid on your home equity loan or credit card balance), diverts financial resources that could otherwise be allocated to more useful, government-provided goods or services. The federal annual budget is very close to $4 trillion, of which $258 billion is debt service. 

 

The U.S. population is approximately 309 million. On a per person basis, the national debt is valued at $61,000 per citizen. The more relevant figure is $165,500 per taxpayer as this reflects a primary revenue source for debt service. To place that in figure perspective, consider a 30 year mortgage in the amount of $165,500, with 3% interest, no PMI and no down payment, on a random $300,000 home. Using this mortgage calculator website, see http://www.mortgagecalculator.org, the monthly loan comes to $1,137.34, with an annual payment of $13,648.12. Over the life of the loan, at 360 payments, the borrower would pay $409,443.63 to finance her or his share of the debt. These calculations rest on fairly bold assumptions, including most notably equal debt financing among taxpayers. Tax rates are, instead, graduated, and so the well off pay more, often much more. Some will pay many multiples of that figure, whereas others will pay far lower amounts. Even so, this gives a general sense of the scope and scale of the national debt problem. As the debt continues to grow, meaning as we continue to accrue budget deficits, more and more future resources will be allocated to debt service, limiting the financial resources available for other matters, and yes, this is all to the financial detriment of our grandchildren. 

 

Liberals tend to be more concerned about the impact of global climate change. The models have become increasingly stark over time, with dire predictions concerning melting glaciers, dying coral reefs, rising sea levels, and increasingly inhospitable habitats due to rising temperatures and droughts, not only for innumerable animal species, but also for our own. This link to the NASA Website, titled Global Climate Change: Vital Signs of the Planet, provides an accessible pathway for those who would like to do more research, including resources to learn about the general state of the scientific consensus. See http://tinyurl.com/jtg7v2f.

 

The incidence of the global climate change models are not singular in their predictions, but there are cited meta-studies showing the general predictive trends. Not surprisingly, the greatest impact will be felt in societies located in less well off parts of the world. And we are learning that the impact is happening at a faster, indeed alarmingly faster, pace as compared with earlier models. The dollar values of these harms are far more difficult to quantify. First, the studies rely on models that lack precise valuations. And second, the valuations involve profound incommensurables. How do we assess the value of a lost habitat for a species that will become extinct as a consequence? How do we value the great suffering of large numbers of persons with whom we do not come into contact and might never know? 

 

Both sides claim that the other side is failing to attend to the needs of our grandchildren. Conservatives lament progressive liberal policies that risk limiting job growth, interfering with markets, and contributing to the federal deficit, thereby worsening the national debt. Liberals lament the unwillingness or inability of our political leaders sometimes to acknowledge, and oftentimes to confront, a crisis looming on a global scale, making life for our progeny unlike anything experienced in the past, risking the displacement of entire populations, and threatening conditions that are unsustainable, both as a financial and humanitarian matter. Beyond the obvious human suffering, there are profound yet unanswerable questions: Who will bear the cost? Will this lead to military conflict? Can nations possibly coordinate policies to abate the risk given their starkly different interests and the insurmountable political challenges involved? 

 

I cannot pretend to be neutral on this divide. Both sides are right that today's decisions affect future generations. As far as the debt goes, there are only a finite number of responses. We can finance through taxation, by cutting expenditures, or by monetizing, meaning reducing the debt in real, as opposed to nominal, terms through inflation. (I'm leaving out defaulting on the debt, despite Donald Trump's suggestion that the United States's debt obligations might be subject to renegotiation, see http://tinyurl.com/kn9x4l2, as this has never been regarded a viable fourth option. The United States cannot, and must not, renege on its debt obligations.) Each of these options imposes considerable costs on future generations, although the incidence of each approach is borne differently by different groups. And yes, it is easier to spend today than to evaluate the cost of those political choices on future generations. Much to our detriment, we humans are naturally myopic.

 

But the far greater threat to humanity, and yes, to our grandchildren, is failing to tackle something truly existential. And it is profoundly mistaken to imagine that the differential incidence of the burdens of global climate change somehow immunize those who are well to do and fortunate to reside within the most developed parts of the world. But even if that were not so, there remains a far deeper moral issue. Our grandchildren will suffer, but likely far less than others around the globe. To other people's grandchildren we also owe a great moral responsibility. Yes, both sides are suffering blindspots. As for me, I'm far more stressed by that huge approaching truck being missed on the right.  

 

As always, I welcome your comments.

 

 

 

 

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