The central political problem of our time is finding some way to stop the present from stealing from the future. Whether the issue is global warming, cutting taxes or funding higher education, we apparently find it impossible to resist the temptation to spend today what our children will have to pay for (at much increased expense) in some conveniently distant tomorrow.
In each of these cases, we are passing on the costs of our behavior to future generations, in a way that is both economically inefficient and deeply unfair. For example, it would be much cheaper in the long run to take serious steps to cut back on carbon emissions now, but in the long run, as John Maynard Keynes famously observed, “we are all dead.”
So we continue to live ecologically destructive lives because most of the consequences of our irresponsible behavior will be visited on our descendants, who at present have little or no say in the matter.
Similarly, when we vote ourselves tax cuts today we are in effect voting for tax increases -- and/or spending cuts -- for our children. Combining tax cuts with increased spending is the social equivalent of running up a multi-trillion dollar credit card balance and then mailing the payment notices to the future.
This is why the so-called “fiscal cliff” is a phony metaphor. There is no fiscal cliff -- not as long as we can keep putting off the due date for our bills, which we can and will until they’re somebody else’s problem entirely.
Or consider how we have come to fund higher education in this country. I, like so many other members of my generation, went to an excellent public university and an equally excellent public law school for not much more than the opportunity cost of attendance. If I were to attend the same schools today, I would have to pay more than $200,000 in tuition for the privilege.
This helps explain why outstanding student loan debt has grown by a factor of five over the course of the last decade, from around $220 billion to more than one trillion dollars – and it’s rising by a mind-boggling 15 percent per year.
A simple extrapolation of that trend brings to mind two economic aphorisms. The first is Herbert Stein’s observation that “if something cannot go on forever, it will stop.” Equally germane is Michael Hudson’s almost Zen-like insight that “debts that can’t be repaid won’t be.”
Here is one small but telling example of how we’ve gotten into this series of increasingly intractable messes. As recently as 1990, the highest-paid university president in the country was making $275,000, and even the presidents of Harvard and Stanford were making quite a bit less than $200,000 per year (adjusted for inflation, this means they were making around $300,000 in 2012 dollars).
Today, little more than 20 years later, 39 university presidents are making more than $1 million dollars per year, with several making more than or close to double that. In other words, the highest-paid university presidents are making four and five and six times more – in constant, inflation-adjusted dollars -- than they were in 1990. And more than 300 university presidents make more today than the highest-paid university president made in 1990. Meanwhile, median household income in America remains almost exactly what it was then.
Now, why should academics be paid salaries that are similar in real dollars to those earned – or at any rate paid to – the chief executive officers of Fortune 500 companies a generation ago? The answer, of course, is that CEOs are now paid 5 and 10 and 20 times more than they were then, so people who go into what is still thought of as public service are far less shy about demanding -- and getting -- what until recently would have been thought of as obscene compensation packages. (See also this story regarding the enormous debts higher education is racking up and passing on to students as it pursues an increasingly absurd amenities arms race.)
That all of this is being paid for in significant part by educational loans our children will not be able to afford to pay back is a perfect example of the main problem of our age.