In a recent interview in the Wall Street Journal, billionaire Stan Druckenmiller discusses his recent university tour sounding the alarm on intergenerational theft. The article paraphrases his case:
[W]hile today’s 65-year-olds will receive on average net lifetime benefits of $327,400, children born now will suffer net lifetime losses of $420,600 as they struggle to pay the bills of aging Americans.
It goes on:
When the former money manager visited Stanford University, the audience included older folks as well as students. Some of the oldsters questioned why many of his dire forecasts assume that federal tax collections will stay at their traditional 18.5% of GDP. They asked why taxes should not rise to fulfill the promises already made.
Mr. Druckenmiller’s response: “Oh, so you’ve paid 18.5% for your 40 years and now you want the next generation of workers to pay 30% to finance your largess?” He added that if 18.5% was “so immoral, why don’t you give back some of your ill-gotten gains of the last 40 years?”
He has a similar argument for those on the left who say entitlements can be fixed with an eventual increase in payroll taxes. “Oh, I see,” he says. “So I get to pay a 12% payroll tax now until I’m 65 and then I don’t pay. But the next generation—instead of me paying 15% or having my benefits slightly reduced—they’re going to pay 17% in 2033. That’s why we’re waiting—so we can shift even more to the future than to now?”
In my recent commentary, I examined the recent projections of the Congressional Budget Office: (more…)
According to Fikkert, the evangelical church’s retreat from poverty alleviation between 1900 and 1930 encouraged the welfare state to grow to its size today. Church historians refer to this era as the “Great Reversal” because the evangelical church’s shift away from the poor was so dramatic.
In Faithful in All God’s House: Stewardship and the Christian Life, Gerard Berghoef and Lester DeKoster make a similar case. They argue that “the church is largely responsible for the coming of the modern welfare community.” They also cast the hopeful vision that another reversal might occur: “The church could be largely responsible for purging welfare of its faults and problems if enough believers caught the vision.”
While Fikkert is largely drawing on the early twentieth century in America for his argument, Berghoef and DeKoster examine more broadly the Christian perspective on the relationship between faith and works of charity. This dynamic is, after all, is a perennial challenge for Christian social engagement, and the interaction between the Social Gospel and evangelicalism in America is just one example. Another is the reversal over the last century or so in the Netherlands, where there has been a move from Abraham Kuyper’s claim that “all state relief for the poor is a blot on the honor of your Savior” to the church’s plea “for social security that is not charity but a right that is fully guaranteed by government.” (more…)
I wrote a bit about my short essay describing some of the principles and concepts at play concerning intergenerational ethics and economics. There are also important intergenerational cultural consequences following the Great Recession. A decade ago there was much concern about the rootlessness of current generations and the transience of the workforce. But that ability for workers to move quickly to new jobs in other cities and states has been undermined by the housing crash. Most anyone who bought a home in the last decade will not be moving anywhere anytime soon.
As Robert Bridges contends in a WSJ op-ed, “Coming generations need to realize that while houses are possessions and part of a good life, they are not always good investments on the road to financial independence.” The “ownership society” means something far different today than it did even a decade ago.
In her book How the West was Lost, Dambisa Moyo describes well some of the background leading up to the housing crash. One of the contributing factors was this cultural ideal of a “homeownership” society and resulting government policy to promote homeownership. She contends,
The direct consequence of the subsidized homeownership culture was the emergence of a society of leverage, one where citizen and country were mortgaged up to the hilt; promoting a way of life where people grew comfortable with the idea of living beyond one’s means.
She also judges that there are significant intergenerational implications:
Under the government guarantee system which propels the rapid appreciation of house prices, the only winners are those who can downsize (downgrade) their housing, or move to a different area, and buy a smaller (cheaper) place. Everyone else loses…. This ‘escalator’ effect continues until the time that the kids go to college. It’s a wealth transfer from the younger generation to the older generation as house prices become more expensive.
One of the effects of what Moyo calls “government guarantee system” is that resources (capital) was increasingly invested in homes that might have been invested in other, more productive, sectors.
An incisive piece by Roben Farzad explores why the aftereffects of the housing bubble are not likely to go away anytime soon. He quotes Doug Ramsey of Minneapolis investment firm Leuthold Group, “a student of asset bubbles,” who says, “The housing decline will be a long, multiyear process, and the multiplier effect across the economy will be enormous.”
Jonathan Smoke, head of research for Hanley Wood, a housing data company, argues, “We’ve gone through a period when we should have been tearing down houses. The supply of total housing stock is beyond what is necessary.”
The Roman philosopher Cicero once said to his son, “You are the only man of all men whom I would wish to surpass me in all things.” The form this sentiment takes collectively is a good summation of the universal hope for humankind. We want our children in particular, but also the next generation and the world more generally, to be better off than we are.
We want them to surpass us “in all things,” not simply in terms of material wealth, but also with respect to their development as whole human persons, body and soul.
Earlier this week I had the privilege of participating in a panel discussion hosted by Common Sense Concept at AEI on the current debt crisis facing America, focusing particularly on applying the concept of “intergenerational justice” to the problem. You can view the entire event at the AEI page. A highlight of my comments appears below:
One of the things we talked about during the discussion was the idea of “opportunity” and how it relates to intergenerational justice. Cicero’s sentiment assumes this idea: his son needs to have the opportunity to surpass him, to be better than him “in all things.”
I think of how this applies to the hopes and dreams of so many Americans, not particularly for themselves, but for their children. Consider the people you know or stories you’ve heard about parents who work extra shifts and second, sometimes third, jobs to put away money so that their child can have the opportunity they have never had: to go to college, to get a well-paying, rewarding, and fulfilling job, and to see flourishing on an intergenerational scale.
It reminds me of the film “The Pursuit of Happyness” that came out a few years ago. This is a story based on the real-life experiences of Chris Gardner. One of the takeaways from the film version is that so much of what drives Gardner to work harder, to never give up, to continually seek a better life, is that he is doing all this for his son. Lending the portrayal special poignancy, in the film Gardner and his son are played by Will Smith and his own son, Jaden.
A great deal of what we are talking about in this ongoing conversation about the public debt crisis and intergenerational justice centers on this idea of opportunity. Ryan Streeter mentioned it explicitly in our discussion, and Ron Sider’s explication of what the biblical picture of “economic justice” is like could be summed up as focusing on guaranteeing opportunity across generations. In his essay, “General Biblical Principles and the Relevance of Concrete Mosaic Law for the Social Question Today,” (appearing in the latest issue of the Journal of Markets & Morality) the theologian Herman Bavinck describes the Old Testament polity as one in which “the basic necessities for a life of human dignity were made possible for most Israelites.”
The fiscal reality today, however, is that we are rapidly facing a situation in which the coming generations will be constrained from having the opportunity to surpass us because of the profligacy of federal spending, the deleterious commitments to transfer wealth from younger and poorer workers to older and wealthier Americans, and the simply unsustainable levels of spending pursued for decades by politicians.
This is why in the key economic factor to consider in the debates about the ethics of intergenerational justice is that of opportunity cost. As David Henderson writes, the concept’s “virtue is to remind us that the cost of using a resource arises from the value of what it could be used for instead.”
The Social Security system is perhaps the most obvious example in this regard. It is the single largest piece of the federal budget ($695 billion in FY 2010), taking large sections of income out of the checks of working Americans every pay period, that could otherwise be put to a variety of other uses. Depending on the situation, some of these uses might be more immediate and temporary (like food and rent) and others might have longer-term implications (such as investment and savings).
When we ignore opportunity cost and its intergenerational implications, we are constricting the range of options available to current and future generations. We are, in fact, infringing on their rights to liberty and “the pursuit of happiness.”
It’s been awhile since I’ve done a summary post of this kind, but there’s been a fair number of things of interest over the last week or so that are worthy of a quick highlight. So here’s an edition of the aptly named “Five Things” (HT):
Carl Trueman reflects on his visit to the Acton Institute. Concerned about how his Republocrat credentials might come across, Trueman says, “Despite my fears that I might be heavily outgunned at Acton, the seminar actually turned out to be great fun. I had, after all, never before lectured in the back room of a pub, with a pint of Pale Ale in one hand and a notebook in the other. And I thoroughly enjoyed the opportunity of arguing that Mrs Thatcher, and not the trendy Left, was the real radical of the eighties and had actually done much to shatter the class ossification that had gripped Britain for generations.” You can listen to Trueman’s Acton on Tap visit here.
John H. Armstrong discusses his relationship with the Acton Institute. Fresh off a visit to Rome, where among other things he spoke at an event for Istituto Acton, our Rome office, John Armstrong writes of his first impressions of the institute: “I felt like I had wandered in from the cold. As I listened to Catholic and Protestant scholars explain the freedom of markets and governments, all rooted in virtue, I felt as if I was drinking from a fountain that I had been searching for over the course of my whole life. I was frankly tired of political partisanship as a way to change culture. I wanted to connect with people who saw a better way to make a real difference in society without overtly linking their vision and efforts to raw party politics. I also wanted a different paradigm for understanding principles of economic freedom that was not rooted in the modern ideas of socialism, captialism, etc.”
Napp Nazworth chides me for putting principle above prudence. After starting a blog to stop feeling “the need to be somewhat secretive with what I say about my religious and political views, particularly, in my easily found online writings,” Napp Nazworth opens with a series of posts on “A Call for Intergenerational Justice,” in which he writes, “The time for action on our federal budget crisis is now, and Congress can only accomplish this task by working in a bipartisan manner. Solutions to the crisis will be painful to many voters. Neither political party, therefore, will tackle the problem by itself because to do so would be disastrous for that party at the next election.”
Greg Forster has some questions about “A Call for Intergenerational Justice.” In his inaugural post at the First Things blog “First Thoughts,” Greg Forster wonders about “A Call for Intergenerational Justice,” asking, “Will democratic debate be well served if people who admit that they don’t know the difficult details behind the policymaking get up on a high horse and proclaim what the reform agenda must include – with the (barely) implicit suggestion that anyone who disagrees is an enemy of the public good – or of God?”
David Mills rebukes the “Evangelical Left” for coming late to the debt-denouncement party. Sticking with First Things for a “A Call for Intergenerational Justice” trifecta, in a piece “On the Square” today at First Things, David Mills notes the Acton Institute engagement of the Call, but contends in particular that the signers of the document, the “Evangelical Left” in his view, “are very late to the party, and they ought to apologize for being late before they start talking about it as if they’d helped plan it.”
It has been interesting to see the reaction that my comments about the Call have generated. Many have said that I simply misunderstood or misread the document. I have taken the time to reread the document and do some reassessment of the entire debate. Unfortunately this has raised more questions than answers for me thus far.
It was a successful event, if a bit unusual compared to some of our other Roman gatherings. It’s not often that an Acton conference is so focused on the finality of death, after all; we often stick to the other “inevitability” of life, i.e. taxes. Yet in both spiritual and economic terms, there’s no sense in denying it.
The conference covered many different aspects of the changing demographics affecting health care, ranging from declining fertility rates to pharmaceutical research to pensions to hospice care. One of the main objectives of the conference was to help participants understand how both ethics and economics can work together to help us confront the challenge of aging populations.
The conference was co-sponsored by the Pontifical Council for the Family, the John Paul II Institute for the Study of Marriage and Family, the Centro di Orientamento Politicio, Associazione Famiglia Domani, Human Life International, and Health Care Italia. As you can tell from the nature of these organizations, we sought to place health care issues in the context of the family, following Catholic social teaching’s emphases on this fundamental institution and the principle of subsidiarity.
Here are audio clips from three of our speakers who appeared on Vatican Radio’s English World News service:
Bishop Jean Laffitte, secretary of the Pontifical Council for the Family, click here
Dr. Daniel Sulmasy of the University of Chicago, click here
Dr. Michael Hodin, executive director of the Global Coalition on Aging, click here
For the first time, we live-streamed a conference on the Acton website, and we’ll soon post the conference papers and presentations as well as related media on the Istituto Acton webpage.