The Single Scenario Gambit: Why do we keep falling for it?

The peddlers of the fiscal doomsday message keep opening their game with the Single Scenario Gambit (diagram below)—and it keeps working and working for them.  I can’t blame them for sticking with an opening that has an unbroken track record of achieving the equivalent of checkmate in short order, can you? 

Every day, I scan the news stories for articles containing “deficit” and “national debt”; every day, I find at least two or three more journalists who fell for the Single Scenario Gambit.  The articles are predictable and consistent: they all passively accept the projection that thirty-eight years from now, interest on the debt will strangle our grandkids. 

The doom peddlers’ Single Scenario Gambit has two key elements:

1: Things are okay today, BUT . . .
2: . . . if trends don’t change, interest on the debt will grow to impossible levels—largely because of boomer retirements and Medicare. 

The second point is what sends journalists scurrying for their keyboards.   

Here’s the Gambit in chess notation: 

A recent example is from the March 11 San Francisco Chronicle article titled National debt load is a fiscal time bomb.  A good illustration of the Gambit in action.

[Step 1:]
"The danger is not the current level [of interest on the debt]," said Brian Riedl, senior budget analyst at the conservative Heritage Foundation.

[Step 2:]
"By 2045, if we stay on our current path, all federal revenue will be used to pay interest on the debt," said Josh Gordon, senior policy analyst at the Concord Coalition, a nonpartisan budget watchdog group in Washington.

"It's insane," he said.

I agree, it is insane; what’s insane is accepting the phrase “if we stay on our current path” without ever asking “but what if some things improved, such as the working-age population trend, or the growth rates of productivity, real incomes, and federal tax receipts?” 

Before we commit to 38 years worth of the doom peddlers’ policy solutions, wouldn’t due diligence call for exploring more than the one possible future scenario?  The doom peddlers aren’t guaranteeing the future they depict; that’s why they always insert the qualifying phrase starting with the word “IF.”  So why aren’t we exploring a few more plausible futures first?

Several prominent thinkers and doers have some very different ideas about how the future could unfold.  Here are a few examples:

Paul Romer: “By itself, faster growth could resolve all of the budget difficulties associated with the aging of the Baby Boom generation, and still leave ample resources for dealing with any number of other pressing social problems.”

Ray Kurzweil: “Before the middle of this century, the growth rates of our technology... will be so steep as to appear essentially vertical.  From a strictly mathematical perspective, the growth rates will still be finite but so extreme that the changes they bring about will appear to rupture the fabric of human history.”

Arnold Kling: “If Kurzweil is correct, then the mountain of debt that we fear we are accumulating now will seem like a molehill by 2040. We will pay off this debt the way someone who wins a million-dollar lottery pays off a car loan.”

Wouldn’t a higher rate of economic growth be another path to a better future?  Of course it would.  So why aren’t journalists asking the growth questions?  Politicians will never come up with policy ideas for enhancing economic growth if we never ask them the questions in the first place. 

We’re giving our politicians and other doom peddlers a free pass every time we fall for the Single Scenario Gambit.  How about we change the game just a little—by not resigning so fast? 

Comments

[pawnking]

I've often thought that it is not logical to believe that given that people are living longer and more productive lives, we project that everyone will retire at age 65. What I see is some retirement of the less well paid, i.e. the less productive, and the continuing employment of the higher paid, i.e. the more productive.

In other words, the impending retirement boom projected will likely improve productivity of the overall workforce. This will obviously affect growth and therefore tax revenues, the stock market, the deficit, etc., etc.

[Patrick]

I love your chess analogy. LOL.

I can visualize several prominent journalists playing the black side.

However, I think you have unintentionally(?) hit on why your crusade can be frustrating at times: How many people take the time to learn how to play chess? It is somewhat complicated, takes an extraordinary amount of thought, and most people find it incredibly boring.

Incindentally, I think the Global Warming Doom Peddler does one better, they convince the black pieces not to move- that would take energy.

[Kevin]

These are like the people who envision we'll keep using oil full-out and then suddenly in one moment it all stops worldwide -- because we've used the last drop. When really, economic and physical feedback mechanisms will necessarily dictate at worst a long, gradual phasing-out of oil use.

We're obviously not going to suddenly wake up one day spending the entire federal budget on interest. Worst case scenario, many years of constrained resources and gradually increasing interest rates would necessarily moderate our entitlement spending and/or tax laws.

But Steve, I gotta say, you seem to have a wee bit more respect for what Kurzweil peddles than I do...

[Boghie]

Here is another - but related - thought...

401(k)s came into being in 1979. Traditional IRAs a bit later (I think). So, I'll guess that folks started investing in tax deferred accounts in a big way in 1985 - 90. Call it 1987.

Those folks will start retiring. They will retire with taxable income in addition to their now taxable Social Security. Thus, the tax base will be larger than in decades past as the big spending Baby Boomers expend their tax sheltered savings.

I think we are seeing that now.

And, PawnKing makes a great point. Folks who enjoy their work and their income are now healthy enough to work into their later years. Folks, they don't have to quit working if they don't want to. Is that why Social Security receipts are still rising even though we have reached into the Baby Boomer retirement era.

[Steve]

Kevin,

My respect for Kurzweil doesn't mean I sign up for all his forecasts. He's just an articulate example that there are other possibilities besides the negative message of doom -- other possibilities that are being completely ignored in the national debate. I tried to illustrate it in this article a while back:
http://www.optimist123.com/optimist/2005/12/our_grandchildr.html

[Thomas Blumer]

Steve, there are some things you can't grow out of -- or maybe you can, except for the fact that population is flat; not enough people are adjusting their expectations for when they will retire and stop working; people expect and demand nearly-free medical care once they retire for the rest of their lives; and we've put in some incredible brakes on growth like Sarbox that will keep us from growing over 3.5%-4.0%, even during what should be roaring booms.

I think if you did the Monte Carlo thing that the odds of growing through the problem are 10% or less.

[Steve]

Thomas,

If growth got more airtime, we'd be able to knock down roadblocks faster (eg, Sarbox). The false dilemma of cut spending / raise taxes would be exposed for what it is: politics, or ignorance, or both.

The Republicans stand to gain the most, so what's holding them back? The few growth ideas out there are advocated by economic conservative types. The liberal crowd is all about redistribution of today's pie, and are therefore silent about how to grow the whole pie even bigger. (Some even want to shrink the pie.)

Why don't the Republicans bring the growth topic front and center? Fear of failure? Ignorance of growth's potential? Too hard to explain in a sound bite or on a bumpersticker?

Growth means higher and higher personal income across all quintiles; there *must* be a PR firm out there somewhere that's capable of crafting that into a persuasive political message. So why isn't it happening? I don't get it, but I plan to keep hammering away at it here.

[Steve]

Update:
I just discovered the leading reason why the growth message isn't getting out:
http://www.theonion.com/content/news/politicians_sweep_midterm

[Tom Blumer]

THAT is funny, and sad but true.

But on point to my comment and your response -- since we're playing Monte Carlo with the politicians in charge, the Monte Carlo odds are probably lower than 10%. On St. Pat's weekend, I'm happy to see that the Irish have no trouble growing their economy at 5%-plus, and given the incredible innovations that have taken place there's NO excuse we shouldn't have been doing that for most of the past 15 years.

As to why the growth message isn't getting past Heritage, Cato, and Club for Growth, I'd blame the Washington culture, an unassertive president, and a congressional/Senate delegation that got way too comfortable and co-opted, and in general (unless you really screw up, which some did) the advantages of incumbency. I'm sure there are even more.