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Saving the Planet or Fixing the “Debt”?

by DEAN BAKER

Imagine Japan attacked at Pearl Harbor in December of 1941 and our political leaders responded by debating the best way to deal with the deficits projected for 1960. This is pretty much the way that Washington works these days.

The political leadership, including the Washington press corps and punditry, were already intently ignoring the economic downturn that is wreaking havoc on the lives of tens of millions of people across the country. Now, in the wake of the destruction from Hurricane Sandy, they will intensify their efforts to ignore global warming. After all, they want the country to focus on the debt, an issue that no one other than the elites view as a problem.

The reality of course is straightforward. The large deficits of recent years are due to the economic downturn caused by the collapse of the housing bubble. If the economy were back near its pre-recession level of unemployment then the deficits would be close to 1 percent of GDP, a level that could be sustained indefinitely.

But the deficit scare mongers are not interested in numbers and economics; they want to gut key government programs, most importantly Social Security and Medicare. That is why they are pushing the fear stories about the debt and deficit. This is the rationale for the Campaign to “Fix” the Debt, a collection of 80 CEOs ostensibly focused on getting the budget in order.

What is perhaps most infuriating about this crew is the claim that their efforts are somehow designed to benefit our children and grandchildren. This is bizarre for a number of reasons. First, while they do want to cut Social Security and Medicare for current retirees and those expecting to benefit from these programs in the near future, the biggest cuts in their plans will hit today’s young.

In effect they are promising to “save” these programs for young workers by destroying them. Under most of the proposals designed to “fix” these programs Social Security will provide a sharply reduced benefit for retirees in 40-50 years compared with the currently scheduled level, and Medicare will by no means ensure most seniors access to decent health care.

However the even more bizarre aspect of their generational equity logic is the idea that somehow the well-being of future generations can be measured in any way by the size of the government debt. This point should have been pounded home to even the thickest deficit hawk by Hurricane Sandy.

What we do or don’t do in the next decade will have a huge impact on the climate conditions that our children and grandchildren experience. Imagine that we listen to our Campaign to Fix the Debt friends and find a way to pay down the debt while neglecting any steps to curb global warming.

We’ll be able to tell our children and grandchildren that they don’t have to pay interest on government bonds (they also won’t be receiving interest on government bonds, but let’s not complicate matters with logic) as they evacuate their homes ahead of flood waters. Undoubtedly they will be very thankful for this great benefit that we will have bestowed on them courtesy of the public-minded CEOs of the Campaign to Fix the Debt.

In reality the Campaigners are spewing utter nonsense when they imply that the well-being of future generations will be in any way determined by the size of the government debt that we pass on to them. We hand down to future generations a whole society and a planet that will be damaged to varying degrees depending on our current actions. Neglecting the steps necessary to fix the planet out of a desire to reduce the deficit is incredibly irresponsible if we care about future generations.

Of course global warming is far from the only non-budgetary cost that we are imposing on future generations. When we fill our jails with young people, many of whom will spend much of their lives in the criminal justice system, we are imposing large costs on future generations. We just are not honest enough to enter them in the budget books. The same is true of when we make enemies internationally with aggressive military actions that could lead to enduring hostility.

There also are even simpler cases of dishonest accounting. If the government imposed a $250 billion annual tax on prescription drugs (roughly $3 trillion over the 10-year budgetary horizon), everyone would understand this as a large burden on consumers. However, when the government grants patent monopolies on prescription drugs that allow drug companies to charge $250 billion more than the free market price, no one enters this additional cost on the ledgers.

The Campaign to Fix the Debt types like to pretend such costs don’t exist. They just want us to shut up and gut Social Security and Medicare, but the public is not likely to be stupid as they want us to be.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This article originally appeared on The Guardian.

 

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Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

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