Tuesday, March 27, 2012

Will The Standard of Living of Our Children Decline Due To Profligate Spending and Depletion of Resources?

I got into a debate the other day about whether our children will experience a declining standard of living. My opinion is that the standard of living in the U.S. for our descendants is going to be significantly below current levels due to: 1) massive government debt; 2) underfunded pension and medical obligations, 3) an ageing population; 4) resource depletion; 5) extreme weather.

Regardless of whether my bleak view of the future is accurate, I find the complacency regarding the risks of the economy heading off a cliff to be inexplicable. The U.S. economy may muddle through for the next few years, but the fact that our profligate behavior is creating so much risk for our children is concerning. If the World War II generation was the “greatest generation”, will we be considered the “worst generation”.  I do not think it to be much of an exaggeration to consider our generation to be financial sociopaths. We continue to pile up government debt to support our lifestyles, while leaving the burden for future generations to pay off.

It seems highly likely that the U.S. will elect politicians in November that will continue to pile up trillion dollar annual deficits. At some point, the massive government deficit and debt will become unsustainable. Further, U.S. voters do not have the political will to address the coming Medicare crisis. The depth of the Medicare crisis is outlined in Mish’s post on the 2013 Budget Showdown.

The current frustration over the current high cost of gasoline may grow in intensity as the supply of cheap oil is depleted. While enough new sources of oil has and will be discovered such that we will not run out oil during this century, supply is tight and may get tighter. As the expensive of pumping and refining new sources of oil continues to go up, so will the price of gasoline.  Further, investment in clean energy simply produces electricity, it does not replace oil. I challenge anyone to remain complacent about the impact the cost of oil may have on the U.S economy after reading Global Oil Risks in the Early 21st Century.  Oil is not the only resource that is being depleted. Aquifers are being depleted. The oceans are being over fished and becoming more acidic.

The more time that passes before U.S. voters address the fact that we are on a path toward an economic calamity, the harder it will be to avert the crisis. Given the current failure and total lack of political will to address hard economic choices, I fear the standard of living of our children will be substantially lower than what we have experienced. 

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