Diane Coyle runs Enlightenment Economics, a consulting firm specializing in technology and globalization, and is the author of a number of books on economics, including The Soulful Science (Princeton), Sex, Drugs and Economics, and The Weightless World. A vice-chair of the BBC Trust and a visiting professor at the University of Manchester, she has a new paperback coming out this Fall called The Economics of Enough: How to Run the Economy as if the Future Matters. Read on for her thoughts on why, like many long-term and difficult challenges, the creation of a sustainable economy is an issue unlikely to be embraced as a campaign issue:
“Will you still need me, will you still feed me, when I’m 64?” sang The Beatles. Paul McCartney wrote these lyrics in 1967 when he was 25, a member of the post war baby boom generation. This lucky generation has enjoyed the expansion of education, the golden age of economic growth, rising house prices, and generous healthcare and pension support from the government if they need it. So the majority of them are doing just fine at 64.
Later generations will not be so lucky. The United States population is aging quickly now. The number of people of 65 and over was 35.5 million in 2000 and will be 69.4 million in 20.30. Every retiree was supported by 16.5 workers in 1950, 3.4 in 2000 – and probably just 2 in 2030, when the last of the baby boomers is due to retire.
What does this have to do with the 2012 Presidential election? The government’s fiscal deficit is far worse than everybody thinks. To pay for current benefits for tomorrow’s pensioners would require an increase of about a third in the employee Social Security payroll tax, according to economists Laurence J Kotlikoff and Scott Burns. Yet of course no candidate will campaign on a platform of raising taxes so much, or alternatively cutting back benefits for seniors like Social Security and Medicaid.
So unfortunately the answer is that the demographic burden has nothing to do with the election campaign. Neither do other difficult long-term challenges, including the depletion of natural resources and energy, resolving the financial crisis that has dragged on for four years, and recreating the prospect of economic opportunity for the middle class. Not one of these (which I wrote about in The Economics of Enough) will make it as an election issue. But that will not make them go away.
The candidates do not believe they can debate these issues in public. But the public knows the economy faces serious long-term challenges with no quick fixes. Hence the steep decline in the trust Americans place in political institutions, including Congress and the media. The people have lost respect for politics and politicians in all the western democracies, not just the US. This year’s US campaign looks like it is going to get exactly the reaction it deserves from the people.