by futurist Richard Worzel, C.F.A.
As a futurist, I read the news differently than most people. By the time something is on the front page of the mainstream media (MSM), it’s usually of very little interest to me. As well, almost none of the coverage of entertainment or athletic celebrities is of any importance when assessing the future. Plus, I typically pay much more attention to an important issue rather than a merely urgent one. As a result, there’s often a disconnect between what I consider to be important in a day’s reportage, and what gets the most coverage.
The disconnect right now is about as great as I can remember. In particular, there are two major issues that are critically important right now, plus a critical issue of massive long-term importance. Of these three, one of the immediate issues, plus the long-term issue, are being completely ignored. The other immediate issue is getting a little bit of coverage, but is largely overshadowed by a related issue of much less importance. Let’s take these one at a time.
U.S. Government debt ceiling
I wrote about this in my last blog, but it bears repeating as the situation unfolds. This issue is getting some coverage, and the coverage is growing, as it will between now and October 17th, when the U.S. Treasury says it will no longer be able to pay its bills. At the moment, this issue is being overshadowed by the shutdown of the U.S. government. This shutdown is an urgent issue, but, on its own, it’s not an important issue, certainly not as important as the debt ceiling. The reasons for the shutdown are important. The Republican Party in the U.S. House of Representatives has been hijacked by a group of right-wing extremists with an agenda that the large majority of Americans does not share.
Now the shutdown of the American government is not a trivial issue, and the longer it goes on, the more damage is done to the American economy, to America’s standing in the world, and to America’s credibility in financial markets. All of that is important. And the loss of face by the Republican Party over this fundamentally foolish move may make them even more intransigent when it comes to the much more important issue of raising the debt ceiling to pay bills already incurred.
If America’s government chooses not to pay its bills on time, and defaults on its debts on or after October 17th, then that will be an event of potentially earthshaking importance in America and around the world. The only reason I say “potentially” is that we truly have no idea what might happen, or how bad it might get. It could trigger a massive sell-off in global financial markets, and lead to a collapse of the world banking system, or the consequences might be something less dramatic. We don’t know because this is an unprecedented situation, but what is certain is that it would affect all of America’s trading partners, starting with Canada, as well as financial markets around the world.
It would certainly cost America its AAA credit rating from those rating agencies that have kept it there after the last debt-ceiling fiasco in August of 2011. Indeed, even if America doesn’t default, the fact that the government is even toying with the idea of refusing to pay its bills might be enough to precipitate a financial panic. After all, would you lend to someone who might just decide they didn’t want to pay you back? The markets hate uncertainty more than they hate bad news. And the closer we get to a debt ceiling default, the worse will be the consequences. Yet, if I do a Google search of MSM outlets on “debt ceiling”, until very recently I got only 6 or 7 hits, many of them related to the August 2011 prequel to this mess.
So failing to raise the debt ceiling, or even plausibly contemplating it, is a historic, critical issue, and should dominate the headlines instead of serving as a sidebar to the shutdown of the government.
The IPCC Report
The Intergovernmental Panel on Climate Change (“IPCC”) released its most recent report on climate change on September 26th, 2013, and it is of historic importance, yet it has seemingly disappeared without a ripple. I thought there would be a terrible row over this. It was unequivocal that climate change is happening, global warming is a real threat to our future, and that the way we live is largely to blame for the problem. I was sure that the climate change deniers and fossil fuel apologists would seek to bury this report in counter-claims. And while there have been counter-claims (none of which are scientifically supported), the report has been buried not by critics, but by a general public that has largely chosen to ignore it.
This is a long-term problem that requires short-term action and attention. It has taken two centuries for humanity to build up the amount of greenhouse gases (“GHGs”) we’ve added to the atmosphere, especially carbon, and the effects work their way through the Earth’s incredibly complex ecology very gradually. Now, finally, the effects are unequivocally being felt in global warming, more extreme weather, and rising sea levels, and it would take us a very long time to stop or reverse these effects, even if we were to halt 100% of GHG emissions immediately, which is patently impossible.
There is enormous momentum in climate change; it takes a long time to start, and would take a long time to stop, if stopping it is even possible. The IPCC report was very clear: climate change is accelerating, and we are giving it an enormous push. But instead of cutting or eliminating carbon and other GHG emissions, the rate at which we are increasing emissions is accelerating. This will greatly magnify eventual consequences, especially as the momentum of climate change will continue to compound the effects for a long time after we change our behavior. All of this means that commencing immediate, effective action on GHGs is of overwhelming importance to our future.
This should be grabbing front-page headlines and provoking debate about what to do. Instead, a week after the report’s release, it hardly even appears on page 16, and often doesn’t show up in the news at all. This is a stunning lack of interest in our own welfare and the future.
The Costs of an Aging Population
This is the long-term problem that is of critical importance. Let me state it bluntly: none of the developed countries of the world (except perhaps Norway because of its thoughtfully-conserved oil wealth) has set aside enough money to finance the aging of the post-war generation, and it may bankrupt us all. This specifically includes the United States and Canada, although Europe and Japan are ahead of us because of their older populations.
This can happen in a number of ways. Governments could fail outright, and be unable to pay their bills. This has already happened to some municipalities in the U.S., such as Harrisburg, the capital of Pennsylvania, and Vallejo, California. And some states, such as Illinois and California, are teetering on the edge of financial ruin, and so are backpedaling furiously. Or it could happen retail instead of wholesale: governments could renege on their promises, and slash what they pay retirees and civil servants in pensions and health care. But then those citizens wouldn’t have enough saved for their retirement, would significantly curtail their spending, and provoke a prolonged economic collapse. There’s no escaping the long-term implications of our previous bad behavior. The best we can do is mitigate the consequences by acting decisively and as soon as possible.
So, how much do you read about this in the papers? How much discussion have you heard about it from politicians and the chattering classes? None. And there’s a good reason for this: it’s a long-term problem, and such problems are generally ignored, no matter how important they are. The general public ignores them because they don’t feel the pinch, and so focus on short-term issues and pleasures. Their attitude is that of Charles Dicken’s character, Mr. Micawber: something will turn up, and then we won’t have to deal with this tiresome issue.
And it would be massively unrewarding for politicians to tackle. Peter G. Peterson is a serious man. He served as Secretary of Commerce under Richard Nixon, and was a member of the Federal Reserve Bank of New York from 2000 to 2004. He was co-founder and was the Chair of the Blackstone Financial Group, a very successful financial advisor, until he retired in 2008. In 2004 he was interviewed by CFA Magazine, the publication of the Institute of Chartered Financial Analysts. In that interview, he commented that “Most of the developed world is heading for a fiscal and economic crisis the likes of which they’ve never confronted before.” But the comment that particularly caught my eye was this:
I got to know [former Prime Minister of Great Britain] Lady Margaret Thatcher. I once asked her, “What do leaders talk about at the Group 7 meetings? Don’t they know that the age wave is about to hit?” She said, “Yes, Mr. Peterson, they all know that it’s coming. But their theory is, ‘It’s going to happen on somebody else’s watch, so why should I take the pain for somebody else’s gain?’” That’s a sobering thought, that kind of generalized irresponsibility.
Richard Lamm, who is a former governor of Colorado, spoke forcefully and publicly about these issues in the 1980s. On March 29th, 1984. The New York Times quoted him at this most provocative when he said, “We’ve got a duty to die and get out of the way with all of our machines and artificial hearts and everything else like that and let the other society, our kids, build a reasonable life.” I heard him speak at a World Future Society conference in Washington, D.C, in the early 1990s, in which he said (and I’m paraphrasing from memory), “My platform is that I want to raise your taxes and cut your benefits. But I don’t think many people are going to vote for that.” He was denounced and ridiculed for his troubles, and labeled “Governor Gloom,” which is indicative of how we deal with people who try to warn us of the coming problems.
In a smaller but similar way, I was publicly ridiculed by an elected official in Ontario, where I live, for raising this issue in the early 1980s. He accused me of fear-mongering, and called me Chicken Little without once looking at the data I had presented. He already knew all about the data. He was talking politics, not reality, and the politics would not permit him to tell the truth. Any politician who did so would summarily be punished by the voters by being kicked out of office, with the result that politicians are justly afraid to talk to us about this. We don’t want to know. And in the not terribly distant future we’re going to have our noses rubbed in the mess we’ve made.
And finally, consider what happens if all three of these problems compound each other. First, the U.S. defaults, destroying its credit rating and thus increasing its interest costs significantly, hobbling its ability to finance future operations, and significantly eroding its strength and prestige around the world. Then more extreme weather, including hurricanes, floods, and wildfires, increase the cost of surviving, as illustrated by superstorm Sandy, leaving us little choice but to spend money we can ill afford on repairing and rebuilding our homes and communities. And finally, our money runs out as either governments go bankrupt, or individuals do when they are deprived of the pension and health benefits they had expected and been promised.
None of these problems are subject to a “do over.” Once they happen, we’re screwed. The only way to deal with these issues is before the fact, which is why they are so urgent.
But have you read or heard about this in the media lately?
Is It All Bad News? Should We Just Commit Suicide Now?
Not everything in our future is bad news. All things considered, and with notable exceptions, we are getting healthier, living longer, and as a species are becoming wealthier. Global poverty is on the decline, as is the general propensity for major wars. There is a global movement, ferociously opposed by those scared of the future, towards greater tolerance, acceptance, and equality for women, gays, and minorities. What’s more, the future of life extension is bright, and it’s been said that if you can survive the next 20 years, you can live forever – or as long as your money holds out, which isn’t quite the same thing.
So there is a lot to look forward to. But to enjoy the future, we must also pay attention to the dangers that are truly important, not just interesting or seemingly urgent. We can’t ignore problems, because they won’t just go away.
© Copyright, IF Research, October 2013.
 Susan Trammell, “AgeWave”, interview with Blackstone Chairman Peter Peterson, CFA Magazine, Jan-Feb 2004, pp. 32-36.