'Generational Theft'? Even with Stimulus and Bailout Spending, U.S. Fiscal Policy Does Not Cheat Future Generations

Abstract

Despite the oft-heard claims that current generations are stealing from future generations by running fiscal deficits, both theory and evidence suggest that this is either not true or not knowable. Intergenerational justice is not an appropriate lens through which to analyze fiscal issues, because there is no obvious starting point from which to build a moral consensus about whether current generations owe anything at all to future generations - and even if we do believe that we owe something to future generations, no one has offered a useful method by which we can determine whether we are doing enough for our progeny. Moreover, if we believe that future generations should be made better off than current generations ("I want my kids to be richer than I am."), even pessimistic forecasts indicate that future generations will be much wealthier than current generations, meaning that we are already being quite generous to our children and grandchildren. In addition, the recent significant decline in our economic prospects does not argue for a more contractionary fiscal policy in light of concerns about future generations. In fact, when times are bad, there is no conflict between the interests of current and future generations. Spending by the government helps to improve the economy, which encourages businesses to invest in future productivity. This virtuous cycle is even stronger if the government's spending is itself used to invest in future productivity.

Keywords: Fiscal Policy, Deficits, Debt, Generations

JEL Classification: H50, H60