Leaving assets to future generations
Letter in The Province [Vancouver, B.C] 07 Nov 2016 (with footnotes to editor)
Re: It’s absurd, but Liberals will likely get away with racking up whopping deficits, John Ivison | November 2, 2016
Columnists fretting about $130 billion in accumulated infrastructure debt egregiously overlook that future generations will also inherit $130 billion of infrastructure assets. And all the debt payments made by future generations will also be received only by future generations. If inequality is too high at that time because the rich collect too much, then the government of the day can always address that problem through taxation.
If the federal government is truly concerned about future generations, then it better get cracking today. For example, future seniors seeking medical attention will want good transportation to a hospital fully equipped and staffed, with adequate clean water and power. They will not get much consolation if instead they are handed a sheaf of financial papers proving that the federal government successfully brought its budgets to balance by failing to prepare for the future.
1. Dean Baker is a macroeconomist and codirector of the Center for Economic and Policy Research in Washington, DC and previouslyan assistant professor at Bucknell University. https://rwer.wordpress.com/2016/05/16/what-can-donald-trump-teach-us-about-the-national-debt/
"We pass on a whole society, with a physical, social and natural infrastructure. Anyone who tries to evaluate generational equity by the size of our natural debt is clearly clueless....."
2. Economist Abba Lerner on “The Burden of the National Debt”
"Lerner wrote (p.256):
Very few economists need to be reminded that if our children or grandchildren repay some of the national debt these payments will be made to our children or grandchildren and to nobody else. Taking them altogether they will no more be impoverished by making the repayments than they will be enriched by receiving them.
In other words, there are distributional consequences within generations but not between them.
In this regard, Lerner noted that (p.261):
If the additional taxes are more progressive — more concentrated on the rich — than the additional holdings of government bonds, the effect will be to diminish the inequality of income and wealth."
3. MMT: What it Means for Canada
"For example, in the debate over how to address the aging population, it should be obvious that the only way to address this issue is to increase future productive capacity. This involves the application of real resources now to research, infrastructure development, education (including in areas relevant to servicing an aging population), etc. So while more resources will probably be needed in the future to attend to a larger cohort of elderly people, it does not follow that if the government “saves” money now, this will somehow help to address the needs of the aging population in twenty years time, say. Indeed, why on earth would cutting spending now increase the availability of the real resources required in the future: workers, buildings, energy, or metals and plastics for joint replacements?"
Modern Monetary Theory in Canada