For future generations

Tim Pawlenty, Republican governor of Minnesota, declared that President Obama’s budget “will require higher taxes and unfairly loads debt onto future generations.”

And according to a FOX News poll, 77 percent of Americans say they are worried about the increasing size of the federal deficit and 74 percent worry about “leaving the country worse off for future generations.”

But if our concern is really for future generations, we should be focusing on job creation.

Currently, unemployment rests at 10.2 percent, the highest since 1983. Grimmer still is the underemployment rate, a number that includes jobless workers who have not recently looked for work and part-timers who need full-time jobs, which is currently about 17.5 percent.

The Commerce Department recently announced that U.S. GDP had grown at an annual rate of 3.5 percent in the third quarter of this year. Even if this growth, which can largely be attributed to the stimulus passed in February, were maintained – a highly unlikely scenario – we would be lucky to see the unemployment rate fall by more than half a percentage point per year, according to Paul Krugman, a Nobel economist and New York Times columnist. 

Unless something changes, these numbers will have a grave impact on our economy for decades to come. Prolonged unemployment results in “scarring” or, as John Irons of the Economic Policy Institute defines it, “long-lasting damage to individuals’ economic situations and the economy more broadly.”

As IU economics professor Edward Buffie said, unemployment has many hard-to-quantify effects such as divorce, drugs, crime, domestic abuse, prostitution and increases in runaways.

Perhaps most importantly, at the sustained unemployment rate currently predicted, we can expect to see a huge rise in child poverty which will affect the health and education of a future generation.

Moreover, the Congressional Budget Office estimates that the “output gap,” or the difference between the amount the economy is capable of producing and the amount it actually produces, will be more than $2 trillion from 2010 to 2013.  This is largely because people aren’t working.

We absolutely must focus on getting America back to work. To do so, we need to spend some federal funds.

A recent International Monetary Fund report revealed that after recessions caused by a financial crisis such as our own, “the path of output tends to be depressed substantially and persistently,” i.e. economic growth is damaged for the long-term even after the recession ends.

The same report found that government spending could curtail these losses: “Short-term fiscal policy response is significantly associated with smaller medium-term output losses.”

An additional stimulus is a positive sum game. It will benefit us now by affording us a quicker recovery and it will benefit future generations by minimizing the losses from scarring and prolonged unemployment. Our current levels of joblessness will cause much more damage to the economy than deficit spending, especially because low interest rates and dollar depreciation mean current borrowing isn’t very harmful.

“If economists can’t devise something that benefits everyone,” Buffie said, “then they’re not very good at their craft.”

A properly devised second stimulus will provide jobs and spur economic growth both now and in the future. We can’t afford not to.