Those Other Deficits

In almost any discussion of the Federal budget deficit, there is bound to be someone who talks about the burden we are placing on our children. Annoyingly pious as these pronouncements are, they are basically right. What budget deficits do is impose costs on future taxpayers so that we can consume more now. Politicians like this because they can deliver benefits to constituents now without doing unpleasant things like raising taxes.

But conventional wisdom treats this as the only important way that we shift costs into the future. In  fact, though, there are many ways to consume more now at the expense of the future, and most of them attract less attention than the budget deficit. Among them:

• The infrastructure deficit: The existing stock of physical capital deteriorates slowly, often imperceptibly. We can shift costs into the future by not spending money on maintaining, replacing, and updating infrastructure. This saves money now at the expense of greater costs in the future.

• The education deficit: Education raises people's productivity, and indeed the economic dominance of the U.S. is attributed by some to education levels that until recently were higher than the rest of the world, brought about by free or low-cost public education. We can make ourselves better off, and future generations worse off, by underfunding education.

• The environmental deficit: We can have lower costs now, and higher costs in the future, by not controlling environmental damage. This is particularly attractive politically when costs of damage, though perhaps large, will not appear for some time, as with global warming.

Of course, people more commonly refer to these shortfalls as underinvestments, rather than deficits. Obama has been a big fan of that language, and it's perfectly correct.  The problem with it  is that somehow, underinvestment doesn't sound as urgent as a deficit. Yet they are the same thing, in the sense that they are ways to have more now at the expense of the future. The lower salience of  underinvestment gives politicians a lot of room to bloviate about how we need to safeguard future generations by, say, cutting education spending. (Have I mentioned Susan Collins in this blog? Oh, yes, that was October 14.)

A more conventional approach would be the long-debated idea of a Federal capital budget to separate current spending from investment. Having worked in a local government that did not have a separate capital budget, I can tell you that when we had to make drastic budget cuts, the logical thing to do was to cut spending on infrastructure replacement; it was a lot of money and after all, another year wouldn't make much difference. The same thing happens with the Federal government.

Unfortunately, actually implementing a Federal capital budget is fraught with problems. Does all education spending count, or only part? How should we treat maintenance of infrastructure? How do we keep Congress from going, as it were, hog-wild on pork?

All these objections, of course, also apply to my "deficit" terminology. Perhaps the best we can do is choose a rhetorical strategy for showing the absurdity of claiming to help future generations by cutting the things that will make them better off. For that, "deficit" is much better than "investment."