Dean Baker:

Excerpt:

Lesson Four: We Hand Our Children a Whole Economy, not Just a Government Debt

One of the most bizarre inventions of the Very Serious People is the idea that somehow generational issues can be measured by government indebtedness and taxation. We expect people to get wealthier through time as technology advances, and we become better educated and have a better and more advanced infrastructure and capital stock. The well-being of our children and grandchildren will depend on the whole economy and society we hand them, the tax burden associated with the government debt or even the cost of Social Security and Medicare benefits is a trivial part of the picture.

If that sounds hard to understand, let’s try a simple thought experiment. Suppose we snap our fingers and eliminate completely every tax burden for the young associated with us old-timers. That means we not only get rid of the government debt, but we also zero out their Social Security and Medicare tax liability. Sounds great, we’ve really done right by our young now.

Okay, now let’s also get rid of all the technological breakthroughs of the last thirty five years. There are no smartphones or even cell phones. There is no Internet and only the most clunky of personal computers. (Apple wasn’t even cool back then.) Music is still available only on cassettes and vinyl records. Life expectancy is much shorter as we don’t have many of the treatments that have been developed in the last three decades. And, there is no Uber.

So, are our kids better off now? I doubt most people would say yes, especially not the twenty somethings.

If we want to seriously discuss whether we are making things better or worse for our kids then we have to ask about the whole economy and society we pass on to them. When we force many of our kids to grow up with parents who are unemployed and/or in poverty because the Very Serious People won’t let us spend the money necessary to make them employed and let them have decent jobs, this is a huge issue of generational equity. The same applies to inadequate spending on infrastructure and education. Also, messing up the planet with greenhouse gas emissions is a really huge deal (addressed more below). But none of these factors gets picked up in the national debt.

There is one more point that the Very Serious People need to have beaten into their heads. Tax dollars are only one way in which the government pays for things. We pay for a large and growing number of items with government granted monopolies in the form of patents and copyrights. These monopolies raise the cost of everything from drugs and medical equipment to seeds and recorded music by many hundreds of billions of dollars above the free market price.

From the standpoint of our children, it makes no difference if we impose an $80,000 tax on a drug like Sovaldi, and use the money to finance drug research, or if we give Gilead Sciences a patent monopoly that allows it to charge a price that is $80,000 above the free market price. Media outlets like the Post (which gets lots of advertising dollars from pharmaceutical companies) have been very effective in focusing attention exclusively on tax dollars and ignoring all the other ways in which the government directs money and resources. (On a related matter, do you recall any discussion of the $4 billion given to Jeff Bezos by exempting Internet retailers from the requirement to collect the same sales tax as their brick and mortar competitors?)

This.

We buy things with our taxes. The money doesn't get buried in a hole somewhere.

Cheers,
Scott.
(MC & HNY everyone.)