The current administration seeks the biggest peacetime increase in military spending in history, while some domestic and social programs get the axe. How might this affect young people?
MICHAEL HEISE: In the short term, military spending may boost the economy. But in the long term, this is not a benefit, especially for the younger generation because there is no financial return to military equipment and facilities and the debt has to be paid back by future generations.
MOHAMED A. EL-ERIAN: The current policy proposals put economic prospects in a race between debt and growth. This is important. If growth wins, people are better off, with greater potential for both current and future prosperity. But if debt wins, people, and particularly the younger generation, would be worse off having to carry a larger payment burden without a commensurate increase in income and earning potential.
Right now, several pro-growth policy proposals have been put on the table by the new administration of President Trump: More fiscal activism, of which military spending is but one element; changes to a tax regime that has not been comprehensively reformed since the mid-1980s; infrastructure spending and efforts to enable productive private sector activities; and deregulation. If these policies are well designed and implemented in a sustainable manner, growth would stand a good chance of winning the race. But there is a second set of proposals that are anti-growth. Indeed, they are stagflationary, meaning they would cause growth to stagnate while raising inflation. Stagflation is a bad scenario. Protectionism would lead to this. If these proposals were to prevail, then debt would win the race.