The deficit hawks have somehow managed to get it into the heads of many chatterers, and some voters, that their fetish about the federal government’s fiscal deficits and the resulting public debt has something to do with concern for the long term. This is, of course, contradicted by most of the other policies they support and oppose, most of all their opposition to taking out insurance against a climate catastrophe.
So let’s make an inventory of what those now alive will convey to those not yet, or only recently, born:
* Physical capital
– Factories, warehouses, and stores, and the equipment that runs them
– Housing stock
– Physical infrastructure: roads, railroads, the electric grid, telecommunications, ports, airports, dams, and canals.
* Human capital: the acquired productive capacities of individuals
– Literacy and numeracy
– Job-relevant knowledge and skill
– Work habits
* Science and technology: knowledge and know-how incorporated in:
– Books or other extra-somatic information storage
– The processes of work-groups
* Organizational capital: outfits that embody the capacity of doing more useful work than their physical assets and employees considered as individuals can account for. (Reflect on the difference between good and bad performance within organizational types: e.g., between the best and the worst big-city police force or school system.)
– Public agencies
– Universities and non-university research centers
– Voluntary organizations
* Aesthetic objects and traditions
– Visual arts
– Performing arts
* Physical environment
– Built environment
– Resources (e.g., oil, water) still in the ground
* Cultural and social capital (traditions, institutions, and relationships)
– Rule of law
– Respect for republican principles
– Altruism and tolerance
– Business norms
– Norms of personal conduct (e.g., trust and trustworthiness)
– Well-functioning neighborhoods
You’ll note financial assets aren’t on the list. That’s not a mistake. Symbol is not substance.
A financial asset is an ownership claim on land, or on a productive physical or organizational asset, or it’s an obligation of some other person or institution. This generation will not leave the next generation either solvent or insolvent: by definition, the total mount of debt owed equals the total amount of debt held, and the value of the assets is independent of who holds the ownership claims.
As a group, the institutions within a single country (individuals, corporations, not-for-profits, and governments) can be net debtors or creditors with respect to the rest of the world. In that sense, one generation in one country can leave the next generation “in debt.” But it doesn’t matter at all whether the claims held abroad are claims on the government, claims on private parties, or claims on productive assets. What matters is the relationship between the net external debt and the capacity to produce value from which that debt can be serviced.
Fighting the war in Iraq left the next generation of Americans poorer by whatever the amount of real work and materials went into fighting that war and will go into dealing with the aftermath, or rather by the value of what could have been produced instead by those people using those materials. Bailing out the banks left the descendants of bankers, some bank shareholders, and some holders of bank-backed assets richer at the expense of the rest of us. But since the bailout didn’t consume any real assets, it didn’t leave the next generation either richer or poorer, except by preventing the effects on the real economy of an uncontrolled financial meltdown.
And yes, whoever wrote the Simpson-Bowles plan knows this. Whose interests are served by pretending not to know it is an interesting question. But it’s not the interest of the American people, either now or a generation from now.