The Hopeless Generation(s)
Liberal and left-wing economists around the world continue to advocate for massive government spending in order to rescue the world from financial crises. But government spending should not just simply be used to get countries out of recession. Often, they also argue that increased government spending will create a fairer society where the government will save the poor from living on streets without any hope for the future. Of course, this is simply a emotional appeal from the Left that aims to attract votes based on feelings of resentment and jealousy. A quite effective appeal at that.
In the Telegraph, Niall Ferguson takes a look at how lavish government spending, borrowing, and debt is placing a massive burden on future generations all across the world (This is a long excerpt, and I really recommend reading his entire piece here):
According to the International Monetary Fund, the gross government debt of Greece this year will reach 153 per cent of GDP. For Italy the figure is 123, for Ireland 113, for Portugal 112 and for the United States 107.
Britain’s debt is approaching 88 per cent. Japan – a special case as the first non-Western country to adopt Western institutions – is the world leader, with a mountain of government debt approaching 236 per cent of GDP, more than triple what it was 20 years ago.
Often these debts get discussed as if they themselves were the problem, and the result is a rather sterile argument between proponents of “austerity” and “stimulus”. I want to suggest that they are a consequence of a more profound malaise.
The heart of the matter is the way public debt allows the current generation of voters to live at the expense of those as yet too young to vote or as yet unborn. In this regard, the statistics commonly cited as government debt are themselves deeply misleading, for they encompass only the sums owed by governments in the form of bonds.
The rapidly rising quantity of these bonds certainly implies a growing charge on those in employment, now and in the future, since – even if the current low rates of interest enjoyed by the biggest sovereign borrowers persist – the amount of money needed to service the debt must inexorably rise.
But the official debts in the form of bonds do not include the often far larger unfunded liabilities of welfare schemes like – to give the biggest American programmes – Medicare, Medicaid and Social Security.
The most recent estimate for the difference between the net present value of federal government liabilities and the net present value of future federal revenues is $200 trillion, nearly 13 times the debt as stated by the US Treasury. Notice that these figures, too, are incomplete, since they omit the unfunded liabilities of state and local governments, which are estimated to be around $38 trillion.
These mind-boggling numbers represent nothing less than a vast claim by the generation currently retired or about to retire on their children and grandchildren, who are obligated by current law to find the money in the future, by submitting either to substantial increases in taxation or to drastic cuts in other forms of public expenditure.
To illustrate the magnitude of the problem, the economist Laurence Kotlikoff calculates that to eliminate the federal government’s fiscal gap would require either an immediate 64 per cent increase in all federal taxes or an immediate 40 per cent cut in all federal expenditures.
Spot on Mr. Ferguson. While the Left is attempting to sound like they are simply protecting those who are less well off, what they are doing is condemning future generations to a life where they have to pay for the misdeeds of today’s generations. Unfortunately, today’s generations are growing up in a society where they have come to expect to have all their problems solved by the government, without having to worry about how it is financed. All you need is some “hope and change”.
With such a culture of our own, who needs foreign enemies?