Friday, April 24, 2020

The Worst Invocation of "Future Generations" Yet Comes From (No Surprise) Mitch McConnell

by Neil H. Buchanan

As a Baby Boomer, I am one of the tens of millions of direct beneficiaries of our parents' and grandparents' herculean efforts to defeat Nazi Germany and the other Axis powers.  Never once have I thought to myself: "You know, that was too expensive; and I wish they hadn't done that by borrowing so much money."  Maybe I am not in the loop, but I have never heard anyone else even hint that fighting WWII was an unfair burden on the generations that followed.

And let us be clear: Fighting rather than surrendering was expensive.  Public debt as a percentage of GDP increased from about 40 percent before the war to more than 100 percent at the end.  In an economy with nominal GDP of about $230 billion immediately after the war, we had borrowed about $200 billion to win.  To be clear, our parents and grandparents also sacrificed enormously at the time, not just the hundreds of thousands of Americans who died (to say nothing of the tens of millions who died in other countries) but in the daily privations amid shortages and rationing.  But it is true that they did borrow far beyond what had been thought possible.

Again, however, I cannot imagine anyone saying that such borrowing was a bad idea.  More to the point, it would be absolutely insane to say that the debt was "unfairly piled on the backs of future generations" by irresponsible politicians.  Those politicians made the right call, and no one from the Baby Boomers onward should think for a moment that we were treated unfairly.

This is all true, moreover, even though there was a large amount of war profiteering going on everywhere during those years.  Yes, some scumbags actually did steal large amounts of money and should have been found out and forced to pay it back -- with penalties and interest (and jail time).  While the fighting was going on, we simply had to tolerate a certain amount of such theft; and afterward, it was only possible to bring justice to a small number of cases.

Today, in the midst of the biggest global crisis since WWII, we have conservative politicians and mindless journalists obsessing about recent increases in the public debt.  At least one, Senate Republican Majority Leader Mitch McConnell, has even defaulted to the "What about future generations?" trope.  This is both illogical and offensive.

Earlier this week, in columns both on Verdict and here on Dorf on Law, I sharply criticized The New York Times and especially The Washington Post for giving prominent attention to politicians and think tanks that make their living by scaring people about government borrowing.  At the end of the Dorf on Law piece, I essentially said that the most generous (to a fault, I would add) reading that one could allow for the anti-borrowing arguments might be something like this: Because of the pandemic, future economic growth might be lower than it would have been without the pandemic.

Even Captain Obvious would respond to such an assertion with "No duh!"  The world is less well off because a deadly virus is on track to kill hundreds of thousands if not millions of people worldwide?  Yes, how could that not be true?  And, as I will discuss in a column next week, people will be much worse off than they otherwise would have been -- even in the face of a pandemic -- because Trump has handled it all so horribly.

But how do reporters make the silly point that the pandemic will reduce living standards seem less trivial?  By invoking false claims that recent increases in public debt are "locking in a future of lower growth" (in the words of The Post's David J. Lynch), which has the advantage of appearing to be nonpartisan and ever-so-wise, because it taps into the dangerous conventional wisdom about deficits and debt.

The idea, then, is that it is the borrowing (as opposed to the pandemic and Trump's handling of it) that is causing the future to be less bright, because -- as everyone surely knows -- debt decreases growth.

Except that it does no such thing.  Both in the short-term and the long-term, debt can be used to prevent (or at least minimize) economic damage rather than causing it, and it can increase rather than decrease future growth.

At the end of the Dorf on Law column, I noted my intent to use today's column to "write about how that money should be spent, in part to show why spending and borrowing can be good, and in part to respond to another emerging trope of the neoliberal orthodoxy, namely that 'liberals should not use the pandemic to get what they have always wanted.'"  Because McConnell has now intervened and said something so utterly specious and dangerous, however, I will put off that discussion until next week.

McConnell's headline-grabbing statements, uttered during an interview with a hyper-conservative radio show host, came as he refuses to allow Congress to provide state and local governments with desperately needed funds to prevent them from having to cut services and lay off millions of workers (in an economy that has lost at least 26 million jobs already in the last few weeks).  McConnell even suggested that states should declare bankruptcy, which (even if possible) would merely allow states to breach their legal obligations to pay workers, contractors, and so on.  How very Trumpian!

The condemnation of McConnell's insanity -- especially his labeling of aid to states as "Blue State Bailouts" -- has been swift and appropriately severe.  New York's superstar governor Andrew Cuomo pointed out, among other things, the well established fact that blue states are net subsidizers of red states through the federal government.  Paul Krugman in The Times and Paul Waldman in The Post were particularly effective in lambasting McConnell, and even many Republicans have distanced themselves from him.

Again, all of those reactions are appropriately taking center stage.  I, however, do not want to lose this opportunity to point out just how far off base -- indeed, how crazy -- McConnell's comments were when he reflexively invoked the supposed burden of debt on future generations.  Specifically, McConnell said this (referring to state governments):
"My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that [declare bankruptcy]. That’s not something I’m going to be in favor of....  We all have governors regardless of party who would love to have free money."
This is such boilerplate from politicians -- including from many so-called centrist Democrats -- that it has gone by mostly unnoticed.  But we need to think about what McConnell is saying here.

We currently have two paths that we can follow.  First, we can use the federal government's ability to borrow money (currently at negative real interest rates, by the way) to transfer funds to state and local governments that suddenly face budget crises.  Second, we can tell those governments that no help is coming, so they have to sink or swim on their own.

And let us be clear, they will sink if we follow the second path.  What would that entail?  In addition to the police, firefighters, health department workers, garbage collectors, water and electrical workers, and so on who would be laid off, consider two of the biggest drivers of sub-federal level spending: Medicaid and education.

Having states go bankrupt would mean that -- just when tens of millions of Americans who had been lucky enough to receive health benefits from their employers have lost their jobs -- the core program that provides health care to people who cannot afford it would be forced to stop covering millions of people.  The result -- a lengthening of the pandemic and a worsening of the economic damage that it is imposing -- would not be good for "future generations."

Honestly, if one were to ask current twenty-somethings whether they are willing to have the government "stick them with the bill, to be paid off in the future" for saving the economy from an even greater collapse now (which would harm long-term growth even more), all but a few members of College Republican clubs -- and probably not even most of them -- would say that this is an easy call.

Just as my generation does not regret the large increase in borrowing in the 1940's to stave off unimaginable disaster, current young people (and their children and grandchildren) would be daft to think that the better path today is to flush what remains of the economy down the toilet.  Among other things, doing so would simply accelerate the problem, with mass layoffs building upon mass layoffs.

Today's young people want to graduate into an economy that can actually offer them opportunity, not a repeat of the early 1930's when the government refused to support the economy.  Indeed, we need to remember the "double-dip" during the Great Depression, when Franklin Delano Roosevelt himself defaulted into anti-borrowing presumptions and needlessly extended the nation's suffering by trying to balance the budget in 1937.

And what of the other big-ticket item in states' budgets?  Both K-12 and higher education hang in the balance, not only with tens of millions of teaching and support jobs on the line but the continuing ability of the nation to educate its young people.

In a recent Verdict column, I recounted an almost poignantly ludicrous moment from a decade ago, when three fiscal conservatives in the U.S. Senate (two Republicans -- including the hapless Susan Collins -- and one conservative Democrat) insisted that the stimulus bill to fight the Great Recession be cut back, all in the name of reducing the debt burden on future generations.

Which funds were cut?  Why, education funding, of course.  As I put it in my recent column: "[C]onsider the argument here: Debt harms young people, so it is essential that we not spend money on education for young people!"

The only difference today is that McConnell's ill intent is aimed at state governments in general, not specifically at their education funding.  But adding one step to the process changes nothing.  We would still be saying that, in order not "to borrow money from future generations," we must worsen the education of younger generations immediately.  Who thinks that way?

If we do what we need to do -- that is, if the federal government borrows and spends the money necessary to keep the economy alive and to prevent needless cuts at the state and local level -- younger people will find themselves in future years saying, "We have a lot of public debt, more than we would have needed to take on if there had been no pandemic."

Some of those young people might be gulled by future Mitch McConnells into believing that all of that borrowing was somehow avoidable, but most will see it for what it was: the smartest choice available when the other option was to allow people to suffer and to destroy the future growth potential of the economy.

Do I wish it had been possible to beat Hitler without more than doubling the national debt?  Sure.  Do I wish that Hitler had never become a problem in the first place?  Yes, that would have been even better.  But given the actual choice -- fight (at a high cost) or give in -- I am forever grateful that our parents and grandparents made the right choice.  Young people today deserve to be protected from bad decisions, and not taking on the debt that is needed today would the worst decision possible.

2 comments:

jax said...

As long as the dollar maintains its place as the world's reserve currency, we can continue to borrow globally without many repercussions. Right now the treasury could likely sell trillions of 50 year bonds at 1%.

If at some point we can only borrow from our own future generations, then a day of reckoning may come. By repeating the mistakes of 1930s, we could find ourselves there much sooner than sometime for future generations.

Frank Willa said...

'Future Generations" is one those simplistic 'bumper sticker slogans' that the Rs have gotten away with for many years. It makes sense to many 'regular' voters, they don't want to be unfair, and more so, to their children and grandchildren.
It may be simplistic but isn't this kind of debt- and much other fed spending,e.g. for building a bridge that will be used for 50 years, more akin to 'payment plan' financing for consumers that has created many gains for so many? So, like borrowing to pay for a car- payments for years in the future- using it now and into the future.
As you say about states declaring Bankruptcy- even if possible...states can not impair their own obligations, the 10th A, and not in current code (only local govt); I will leave to those that write here and Verdict.
But if so, the complexity of a court handling such a massive case; and with what looks like a huge increase in personal and business filings, are we not on track to overwhelm the courts capacity to process all that is coming in the next year or so? Shouldn't Mitch be more concerned with hiring more judges and clerks; oh, or trying to stave off the insolvency disaster that is about to unfold unless we do as you say- take on this debt burden to protect from far greater 'future generations' harm?