Tuesday, January 29, 2013

Climate Change vs. Fiscal Crisis

There has been a spirited debate about whether people should compare the long-term debt to climate change.  Here's  former Treasury official Steve Rattner, quoted by Joe Scarborough:

"We are putting millions of tons of carbon in the air every day; we are also adding billions of dollars to our future entitlement obligations every day. We are borrowing (stealing?) from our children to pay far more in benefits to seniors than we are paying into the system.We have something like $60 trillion in unfunded liabilities to Medicare and Social Security. Paul Krugman would like us to just wait until those programs run out of money, at which point those unfunded liabilities would be just that much larger."

In other words, just like Krugman doesn't want us to wait when it comes to addressing climate change, he shouldn't want us to wait when it comes to addressing the deficit.

Krugman has responded to these types of arguments, and you can read that, but I think he's a little too clever and subtle to thoroughly convince the economically ignorant (aka, me) .  So I propose a simpler distinction that can illuminate the difference between climate change and the deficit: you can put off a future problem until it is a present problem, but once a problem shows up and bad things start happening, it is impossible to ignore the problem.  It will affect you.

And that's climate change.  Climate change is here.  Global temperatures are up.  Extreme weather events are up.  Climate change is doing bad things, to us, right now (key words in that article, "which has already begun to cause trouble").  You simply can't argue that climate change won't have bad consequences, it is having them.

That's not true with the deficit.  Fiscal crisis is not here (in America).  Inflation is not up.  Interest rates are not up.  Yields on treasuries are not up.  Etc.  For the time being, the deficit isn't doing anything bad.  If you are worried about America having a fiscal crisis because of its deficit, you are worried about the future.  We don't have that problem yet.  And even if you disagree with that, you have to acknowledge that Krugman thinks the deficit isn't doing anything bad right now, just like he thinks climate change is.

So yeah, that's the distinction.  When a bully is threatening you from across the playground, you can ignore him.  When he's punching you in the face, you've got to deal with it (or at least, have a really good reason why you should still ignore himt).  That's not proof that Krugman is right -- sometimes you shouldn't ignore the bully across the playground -- it's just proof that the comparison is dumb.

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