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Will the next President acknowledge generational accounting?
By Lauren | May 23, 2008
Continuing with my Friday series on ethical challenges facing the next President, let’s talk about the financial obligations of future American taxpayers. Almost every public policy decision that lawmakers take has some financial impact on generations to come. Promises get made, tax dollars get allocated, and the costs of benefits promised to the voters of today come back to haunt their children and grandchildren. The problem is that the present value of money is higher than its future value, so it takes more (sometimes a lot more) of tomorrow’s money to pay off a debt that’s incurred today.
Boston University professor Laurence Kotlikoff and his fellow economists Alan Auerbach and Jagadeesh Gokhale have proposed a system to track governmental financial obligations that they call “generational accounting.” Their premise is that the federal books shouldn’t just be balanced from one year to the next, but should also take into account the long-term debt that today’s political promises will impose upon future generations. Their numbers are staggering: while actual estimates differ depending on whose assumptions you use, current U.S. debt (taking into account future generations’ contributions and whatever promises get made to them) may go as high as $51 trillion. That’s one heck of a bill for Americans to leave to our children and grandchildren, and there’s no way to reduce it without huge tax increases, major benefit cuts, or both.
Most appalling to me is that our last two Presidents apparently sidestepped this troubling issue. An April 19, 1998 article in the Dallas News quoted Professor Kotlikoff as claiming that the Clinton Administration only included generational accounting in its first budget (and as a footnote at that), and that the Bush Administration addressed generational accounting in two budgets, but then it disappeared. Kotlikoff is also quoted as saying that the Congressional Budget Office didn’t want to publish new work on generational accounting that colleagues had done. I know that politicians don’t like to deliver bad news, but if government officials have deliberately withheld information about a looming financial crisis they have truly failed in their responsibility to the American people.
Critics quibble with various elements of generational economics, but there’s no denying that the debts our nation is presently incurring will come down hard on the shoulders of tomorrow’s taxpayers. Can it be ethical for American voters to burden future generations with trillions of dollars of debt for benefits that we enjoy today? Can it possibly be ethical for U.S. Presidents to bury this issue in budget footnotes or ignore it altogether? Will the next President have the courage to openly inform the American public that we’ve been buying our present comforts with future generations’ tax dollars?
Would your Presidential candidate have the courage to take this issue on? If so, what would s/he do, and are you comfortable with that? You decide.
Topics: Presidential Campaign, Social Ethics, ethics |
May 23rd, 2008 at 5:48 pm
Thanks for blogging on this important topic. As always, the most important step is the first one, and that is making the issue known. The longer we wait to solve this, the more painful the solution. Unfortunately, I don’t see any political will to even acknowledge this.
May 23rd, 2008 at 11:15 pm
Sadly, Chris, I agree with you. And the longer we wait, the harder it’s going to be to get this solved.
Lauren