Wednesday, May 7, 2014

Prosperity, Posterity, and Prudence

Manage our today for the kids' future

Last year put a dent in Congress's prudence score: in a slack economy it allowed a rise in payroll taxes, a government shutdown, and lingering economic uncertainty. In July departing Federal Reserve chair Ben Bernanke testified that Congress was the main impediment to a more robust economy. About a year ago I wrote that austerity in a poor economy and extravagance in a prosperous economy are not prudent.

Sustainability is not just an environmental concept but one for all human endeavors, especially government programs. Any government program should be either finite or infinite – never indefinite. When I save for retirement, I'm not looking for riskless investments but, instead, investments where the risks are known and manageable. Social Security began with no end in sight, but Congress failed to make it sustainable as the pool of contributing workers shrank even as the number of drawing retirees grew. And though the rate of federal borrowing slows, the overall debt continues to increase as do payments on debt service rather than government services. Those who benefit from today's debt won't be around to feel its eventual and certain sting.

In a slack economy the focus of government policy is rightly on employment. But to couch every policy discussion and political debate in a "jobs now" framework is wrong. Government should provide defined and finite public goods and services in an efficient manner – creating a pro-market environment that leaves the business of jobs creation to business. Government jobs (and contractor support) just meet the level of goods and services prescribed by voters through their elected officials.

Energy is a paradox: its production provides jobs and the fossil fuels we'll need for the foreseeable future but its use pollutes and depletes a finite resource needed by future generations. The paradox is in full bloom in debate over the Keystone XL pipeline: ardent proponents talk of jobs and energy independence while strident opponents talk of localized catastrophe and global climate change. The answer lies in the present and the future: manage the current risk by building a safe pipeline and reaping the ancillary employment benefits while taxing the pollutants to nudge energy use toward less-polluting alternatives, whatever they may be.

Our Constitution was established, in part, to "secure the Blessings of Liberty to ourselves and our Posterity". Have we succeed in doing so? A few years ago, columnist Robert Samuelson wrote: "Our leaders might try ... boosting economic growth, controlling health spending and trimming benefits for the elderly. But we aren’t sure how to do the first and lack the political will to do the second and third. The future is never entirely predictable, but downward mobility is not just a scary sound bite. It’s a real possibility." Anxiety about the future persists today.

This week at the National Zoo, four lion cubs passed their swim reliability test to prove that they could safely go on public exhibit. With their keepers close at hand, "the cubs had to show that they could keep their heads above water, navigate to the shallow end of the moat and climb onto dry land."

Will our offspring find their footing? It depends on our wisdom, stewardship, and prudence.