Disaster Ahead! The Breathless World Of The New Dismal Scientists

May 23, 2005

Authors: Bernard Wasow

Publisher(s): The Century Foundation

A spate of recent forecasts by economists point to almost unbelievable crises ahead. Laurence Kotlikoff and Scott Burns in The Coming Generational Storm (MIT Press, 2004) recommend that we take antidepressants before reading their book. Kent Smetters and Jagadeesh Gokhale in Fiscal and Generational Imbalances: New Budget Measures for New Priorities (Federal Reserve Bank of Cleveland, 2003) agree that the U.S. economy faces imbalances almost too big to comprehend. At $44 trillion in one much-cited forecast, and $51 trillion in another, these deficits are as big as the total income the nation produces over four or five years.

Yet claims by these New Dismal Scientists (NDS) of a "generational crisis" are almost entirely bogus. This brief criticizes the doomsday projections of the NDS, exploring why: the implicit moral/ethical foundation for such arguments is ad hoc and unconvincing; super-long-run projections are too sensitive to assumptions to be useful; and how, if the NDS' health care cost assumptions hold, the problem will not be generational; our great great great grandchildren will be using almost their entire incomes to pay for medical services for everyone, young and old alike.

In the end, the NDS have manufactured a "generational struggle" where there is none, focusing on problems of health care for the old when the real problem is a system-wide health care cost problem, which unfortunately is all too real.