If you’ve been through a few elections, you know that it’s a cliché to “fear the next generation will be worse off than ours.” It’s uttered as if it’s a sad new insight and that this time, it really could happen.
Each time, it’s been wrong. Every generation since WWII has shown enormous progress on health, education, wealth, prosperity, and peace.
Government-provided services (such as K-12 education) still stagnate, of course. But where each generation has been looked upon with pity by politicians, each generation -- the ones working outside of government -- has made great leaps.
Less measurable but no less profound is a sapping of confidence across our land -- a nagging fear that America's decline is inevitable, and that the next generation must lower its sights.
However, I am inclined to believe the cliché this time. In fact, the new president may fulfill his own prediction. Why? Because he intends to preside over $2,000,000,000,000 of new debt in his first year.
(This is not all Obama’s fault of course. The $850,000,000,000 of new pork is authored the Democratic Congress. And $700,000,000,000 has been evaporated by the now-previous administration.)
An opportunity for the new president
Mr. Obama could use his bully pulpit to emphasize to Americans how wealth is created. You'd like a Prius. Toyota would like $20,000. You’d rather have the car, they’d rather have the cash. In a voluntary exchange, both sides get what they want. Both parties are improved by the transaction: this is new wealth.
When money is seized from one person and spent from another, wealth creation is unlikely. It's not proved empirically. Ask yourself: for the new benefits that the government will offer you next year, would you have voluntarily parted with $13,000? If not, then your wealth is being destroyed.
President Obama will preside over the first generation in which the suburbs of Washington DC -- populated by tax recipients -- are the wealthiest in the nation. It will be the first generation in which more people are employed in government than are employed in manufacturing. These new directions of the flow of wealth look a lot like the formation of black holes.
How it will play out
It’s also a cliché to say that we are burdening future generations with our spending. We accept it on the tacit understanding that we will just keep passing the debt along, and that no one will ever really have to pay; that it’s not real money.
And guess what? It’s largely true. In the absence of real wealth creation, government can only print new money to pay off debts, future and current. That’s the strategy behind the current stimulus/bailouts.
And that’s the real price that future generations will pay: money that is largely divorced from wealth, and which can not buy them prosperity.
The price will not take the form of a 100-page tax bill being plopped on my grandkids’ lawn, as we might imagine. Rather, it will take the form of stasis.
We will notice that no new Googles have been created in 20 years. That the pipeline of life-saving drugs has tapered to zero. That homes are not well-kept because ownership does not offer a return on investment. That New York stinks of old money instead of young vitality.
We'll survive just fine. There won't be soup lines. But people will be dying of cancers that we decided not to cure. We will stay in the socio-economic strata that we are born into instead of making crazy moves to Silicon Valley or Beijing. Our jobs will look a lot like our parents’; we will huddle around race and family since we’ve removed the economic incentive to reach out to others.
Sadly, these are the historical norms for humans. My generation has lived in a time when they were transcended -- an exceptional time when an unprecedented number of humans are born with the assumption of freedom. Can it continue?
Maybe we’ve been here before and emerged, and that I am too young to remember. Maybe the Keynesians know more than I do about the relationship between wealth and money. Here’s hoping.
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