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Posted by: Michael Mandel on February 13
Tyler Cowen has an item titled Do future generations pay for deficits?. He starts off this way:
Assume that government spends some money today on consumption. That money could have been spent on a durable bridge, but it wasn’t. Some current people benefit from the consumption and future generations get nothing.
Above and beyond that effect, do future generations bear the burden of deficit spending?
But of course, there’s a big problem with his scenario. The latest budget pegs the FY 2006 deficit at $423 billion. But federal spending on major physical capital, research and development, and education and training—all long-lived investments—is estimated at $425 billion.
We are not borrowing to finance consumption, we are borrowing to finance long-lived investments.
So a better question might be: Do future generations benefit enough from these investments to justify the cost of the borrowing?
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