America's Mortgage

January 04, 1991|By William L. Renfro

WASHINGTON. — Washington.-- PRESIDENT EISENHOWER warned us in his last State of the Union address: the national debt is a ''mortgage on our children's future.'' To push the budget package, President Bush used the same scary words. But are they true? Who bears the burden of the national debt -- the generation that creates it? Or does the next generation ''inherit'' the burden?

The economists get all tied up in questions of who owns the debt, who is owed the debt, who inherits which part and who has to pay interest on the debt. This may be good economics, if such exists, but it misses the one key point: The borrowed money that is the debt was spent.

It was spent defending the country. Spent fighting cancer, AIDS and many other diseases. Spent cleaning our water, air and land. Spent feeding infants and children as well as caring for the poor, the sick, the elderly. Spent building schools, airports, telecommunications, satellites and all the other goods and services we enjoy so much. It was spent building the house we call America.

Yes, the national debt is a mortgage on this house. The people who will have to pay this mortgage are those who will live in this fine house -- our children. They will inherit this mortgage -- but they also inherit the house.

Are our children getting a raw deal? Only they can answer that in the future. But today, history might be a little help: Did we get a raw deal from our parents?

Imagine having the opportunity to choose when to inherit the house of America and its mortgage. Fifty years ago, an earlier generation ''inherited'' a 1940 house with a mortgage of only $50 billion -- about 50 percent of GNP, a slightly higher percentage than today's mortgage.

However, the economy was struggling to recover from a major depression, the standard of living was a fraction of what it is today, diseases we have all but forgotten were major health hazards, life expectancy was 15 years shorter, infant mortality was four times higher, expected lifetime earnings of a college graduate were about $300,000 (1981 dollars) and a world war that would take 4 years out of every American life, 1 million U.S. casualties and over 25 million deaths world-wide was already under way in Europe.

The generation born after 1940 inherited an additional $200 billion debt for World War II. This is at most a minor inconvenience compared to the burdens of those who fought and died, but that's not the point. This generation also inherited all the benefits of that $200-billion, four-year, million-casualty effort. In crass economic terms, this includes infrastructure, production capacity, technological inventions, medical discoveries like penicillin, recovery from the Depression, education and great advances in all sectors of our economy and society.

Even if all these benefits that come along with the debt are to be ignored and only the economics are to be considered, the economics ain't bad. The expected lifetime earnings of the average college graduate today are almost $3 million (same 1981 dollars). That is a nice inheritance, something very few of the world's children will enjoy.

However the work and accomplishments of the past may be discounted today, they are a source of continuing contributions to our standard of living and quality of life. These contributions cannot be ignored in an abstract economic debate of the dismal science. There can be little doubt that the vast majority of Americans would rather inherit the post-World War II world and the huge war debt, than inherit the 1940 world, a smaller debt and the burden of fighting World War II.

The past is instructive, but cannot tell us whether our children will like their inheritance. Whether they will approve of the choices we made. Whether they want the mix of mortgage and mansion they inherit. And a mix it is. After 20 years of effort, the house of America still needs more cleaning. Some major repairs cannot be put off much longer. Though we made it ''more perfect,'' the house is far from perfect.

The mortgage is theirs anyway. At the very least, our children have the resources needed to pay the mortgage, make the repairs and plenty of worthy challenges for their best efforts.

Will they think they got a good deal? The future will certainly show we could, should, have done better. We didn't pay the mortgage. We didn't even pay the interest. We can't be excused for this and it's never too late to start paying, but neither did we waste our resources. We built and secured a big house with a big mortgage. Our children will inherit them both. Better our children debate what we did, than wonder why we did nothing. If they're as hard on us as we were on our parents, we have nothing to fear. If they repeat our rhetoric, we'll deserve what we get.

Mr. Renfro, a nuclear physicist and lawyer, is a consultant in strategic planning and president of the Issues Management Association.

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