What Debt Are We Passing On To Our Children?


In the free book Seven Deadly Innocent Frauds of Economic Policy Warren Mosler discusses fraud # 2.

Deadly Innocent Fraud #2:

With government deficits, we are leaving our debt burden to our children.

Fact:

Collectively, in real terms, there is no such burden possible. Debt or no debt, our children get to consume whatever they can produce.

One of the things he points out in the discussion of this fraud is the following:

When we operate at less than our potential – at less than full employment – then we are depriving our children of the real goods and services we could be producing on their behalf. Likewise, when we cut back on our support of higher education, we are depriving our children of the knowledge they’ll need to be the very best they can be in their future. So also, when we cut back on basic research and space exploration, we are depriving our children of all the fruits of that labor that instead we are transferring to the unemployment lines.

So yes, those alive get to consume this year’s output, and also get to decide to use some of the output as “investment goods and services,” which should increase future output. And yes, Congress has a big say in who consumes this year’s output. Potential distributional issues due to previous federal deficits can be readily addressed by Congress and distribution can be legally altered to their satisfaction.

So, if we are passing on any debt to our children it is the diminished economic capacity of our nation because we refused to use the tools at hand to get full employment. Ironically, a further debt is that we will leave our children inadequately educated to make the best out of that future economy because we refused to use the resources we had to invest in their education.

Leave a comment