“Government after government in almost every country in the world has piled up future commitments without setting aside any funds to meet them.”
You probably know by now the clear thinking answer, but here it is anyway.
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The idea that it makes any sense to save up one’s own IOUs is just nonsense. Governments use their IOUs as currency and their economic policies control the activity of the economy at any one time. If a machine or a person stands idle for a year then the potential use of both is lost for ever. Its a case of use it or lose it for any available resource. The responsibility of government is to try to ensure as few resources are wasted as possible. Governments , in practice, are concerned not to waste $$ and ££ , of which there is no shortage, but they don’t care if they waste resources when there is always a shortage.
Each generation consumes the products of its own economy. We can’t steal anything from future generations as its just not possible for them to send stuff to us back through time. What can our generation leave future generations? A good transport system, a healthy environment, and a well functioning economy. There’s no point leaving them a pile of government IOUs! They’d be just as inflationary, when spent, as if they printed their own!
Its not a question of whether it “can be afforded” in money terms but whether “it can be afforded” in resource terms. Present commitments may or may not be able to be afforded at some future time. It will depend on the resources which will be available at that future time.
If there aren’t enough trained teachers , trained doctors and nurses etc available at that future time and if everyone is flat out working doing other more important things, as could happen if, say, there were a major war in progress, then the answer would be “no, they can’t be afforded”.
Money, per se, is never a problem. Governments can never run out of money, so there is no point saving it from one generation to the next. The £ is just an IOU of government and governments can issue as many IOUs as they like. But, if they issue money in an attempt to use resources which just aren’t there, they will generate inflation. That’s their only constraint.
Edit: Mike Norman came up with a relevant quote:
Alan Greenspan’s response to Paul Ryan in congressional testimony: “Well, I wouldn’t say that the pay-as-you-go benefits are insecure, in the sense that there’s nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The question is, how do you set up a system which assures that the real assets are created which those benefits are employed to purchase.”
http://mikenormaneconomics.blogspot.cz/
PS If anyone would like to contribute any similar howlers, please email them in. See under About Us for our email address. You’re welcome to write the criticism too.
There’s plenty of other examples out there of utter crap passed off as intelligent comment.
Modern Monetary Theory: Real Economics 
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