The Republican response to President Obama's stimulus package and budget proposals have been nothing but predictable. They warn us that we are about to "saddle our children and grandchildren with debt," debt so profound that it amounts to "generational theft."
The president and a number of commentators were certainly correct to note that this attack dripped with irony, as it followed eight years of massive Republican budget deficits. But in leaving it at that, the Democrats seem to be conceding the fact that government debt is always bad. That's simply not true, but it seems to follow a dance every Washington politician seems forced to follow. We need to stop the music on that dance, right now.
First, right now, debt is required. There seems to be a breathtaking consensus among economists that government debt is necessary now, because only government can create the kind of demand that will open the spigots clogged with cash hoarded by nervous banks and investors. A bank is afraid to make a loan to a steel company that would like to modernize and fire up a steel mill, if there are no orders for steel. If the steel company comes to the bank with a government contract for girders for overpasses on the interstate, the bank will loan the money, the mill will light up, workers will get paychecks, and they will spend at the local stores and groceries. Those stores and groceries will hire workers, buy goods from suppliers, who in turn will hire workers and buy goods. All this will flow from building things we actually need.
But there is another reason that this kind of debt is not "generational theft": Unlike the run-up of government debt over the last eight years, the Obama plan is to spend money on things that will actually benefit the next generation. If we borrow money like the Bush Administration did, and in the end you have nothing to pass on to the next generation except for new bridges and schools in Baghdad badly built by a Halliburton subsidiary, that's generational theft. If, on the other hand, we build schools, bridges, power grids and infrastructure here in the United States, we are creating wealth and the means of more production that our children and grandchildren will actually use. If we borrow money to repair parts of the federal interstate system so that bridges don't fall down when our children and grandchildren drive over them, that's not generational theft. If we borrow money to shore up the levees and wetlands that would protect the next generations of New Orleans-ers, that's not generational theft. Indeed, in that case, it would be carrying out a solemn promise made by George W. Bush as he stood by a floodlit Jackson Square.
As I wrote in this column last October 13, "it is not unfair to 'saddle our grandchildren with debt' if it is to help pay for assets that enhance the quality of life long after we are gone. It is only unfair to ask them to pay for us to party now." That is why that wild-eyed liberal Dwight Eisenhower actually proposed separate budgets for operating and capital. Operating budgets would be pay-as-you-go. Capital budgets that provide for the creation of assets that will be enjoyed for generations to come should be paid for over time. That is good, responsible, conservative, grownup budgeting.
It's instructive to note the bipartisan buzz-saw President Eisenhower ran into when he had the temerity to suggest that his bold plan for an interstate highway system (which he knew was necessary after comparing our nation's roads to the German autobahn) should be considered a "capital investment" paid for by a separate bond issue. Eisenhower, of course, was attacked from the right and the left, because it was easy for politicians to impersonate grownups and insist that government "live within its means".
While the Obama Administration is not calling for the issuance of separate bond issues to finance investments in infrastructure, energy, health care reform and education, that certainly could be justified. The beauty of Obama's budget plan is that it is targeted to spend money on projects that will produce not only jobs in the short term, but efficiencies in the long-term. On infrastructure, the goal is to have a transportation grid that gets the next generation of workers and goods to their destinations more efficiently. On energy, the goal is not only to employ renewable sources of energy that won't choke us to death, but to address the fact that a huge percentage of the energy we already create is wasted in our grid. On health care, a trip to the doctor's office dramatically displays the waste in our system: you'll see dozens of workers dressed in scrubs who don't actually administer health care; rather, they spend their day negotiating with insurance companies. Our wildly inefficient and expensive health care system is choking American industry: that is why the chambers of commerce and the unions both favor reform for the next generation of families. Finally, on education, the plan is to spend money on the infrastructure that won't just create construction jobs now, but will create 21st century classrooms and teaching environments that will hopefully return our competitive edge.
Just like Eisenhower's interstate highway system, the capital projects coming out of the stimulus plan and the Obama budgets are designed to create long-term wealth, and assets that will enure to the benefit of the next generation and the generation after that. The Administration seems to understand that it will be held accountable to carry out that promise. To the degree that effort is successful, that's not "generational theft." That is long-term investment.