11/16/2010 09:30 am ET Updated May 25, 2011

The Best We Can Do: How to Split the Check on National Debt

In a departure from my primary area of expertise, energy and environmental issues, I would like to comment on Michael Kinsley's recent article in The Atlantic, "The Least We Can Do." In brief, Kinsley compares the aspirations and achievements of the Baby Boomer generation (Boomers) to those of the "Greatest Generation" (GGs) just before it. As one might expect, the results aren't pretty. While the GGs survived the Great Depression, enacted the New Deal, and sacrificed deeply to win World War II, the Boomers have a checkered legacy of social achievements and an overall caste of narcissism and greed.

Kinsley then suggests a way for the Boomers to leave behind a striking, positive generational legacy- by paying off the national debt:

What we can do is offer a lecture and a fresh start. We should pass on to the next generation an America that's free from debt. Instead of ignoring it, or arguing endlessly about whose fault it is and who should pay for it, Boomers as an age cohort should just grab the check and say, "This one's on us."

In contrast, he rejects an often suggested alternative legacy, compulsory national service, which he simply terms "taking jobs away from those who want them and forcing them on people who don't." Though it's not my main point, I think this characterization is factually and spiritually wrong, and the idea deserves a more careful look.

Putting on my economist's hat for a moment, I should point out that zero national debt is not necessarily the best social or economic policy. As with families, there are good reasons and good times for nations to take on debt. Most macroeconomic experts agree that well-targeted deficit spending can create subsequent economic growth large enough to repay the debt.

There is much to recommend in Kinsley's article, especially that if you're a Boomer, you believe in stewardship, and you tend to view history in generational terms. The main defect in that argument is this: emphasizing the generational aspects of national debt ducks the intra-generational dimensions of the problem - or, in plain English, the sad realities of our hyper-polarized and deeply unequal polity.

Suppose, for a moment, that we Boomers decided to pick up the check. Since the point is to eliminate the public debt, either we Boomers would have to borrow the money privately or we'd have to pay it out of our savings.

But one of our generation's least charitable legacies is the creation of the most unequal distribution of wealth and income since the Gilded Age, and perhaps worse. Consider these staggering facts:

  • In 2007, income inequality was the highest in 95 years, with the top 0.01% receiving 6% of U.S. wages (double what it was in 2000) and the top 10% receiving 49.7% (the highest since 1917).
  • In a paper getting much-deserved attention, Harvard Business School Professor Michael Norton and Duke University's Dan Ariely found that "most scholars agree that wealth inequality is at historic highs, with some estimates suggesting that the top 1 percent of Americans hold nearly 50 percent of the wealth, topping even the levels seen just before the Great Depression.
  • This accumulation of wealth accelerates in lockstep with the ascendance of Boomers. Of all financial wealth created between 1983 and 2004, 93 percent went to the top 20 percent of all Americans and 42 percent of which went to the top 1 percent. For 30 years of their work, the bottom 80 percent of all families got 7 percent of all financial wealth created.
  • As of 2004 -- near the height of the real estate bubble -- about 75 percent of all households had a net worth of250,000 or less. After the bust, some estimated that 25 percent of all U.S. households had negative or no net assets to their name.

Translating Kinsley's idea into reality would amount to raising the $14 trillion of debt from the wealthiest 10 percent of all households -- perhaps 20 percent if you stretch it. This is the sliver that has become exceedingly wealthy in the Boomer years and has enough private wealth to contribute without draining its retirement savings and forcing asset sales.

Hmm... wouldn't raising the tax brackets on those with very high levels of wealth be one way to accomplish this? And wouldn't allowing the Bush Era tax cuts for the wealthiest Americans to expire, as the President proposes, be a way of implementing this?

We haven't just seen this movie before -- we're in this movie. The U.S. Congress, now filled with members of the Boomer generation, is on the cusp of allowing the Bush Era tax cuts for the wealthy to expire. This vote is one of the only realistic chances for implementing Kinsley's grand idea - perhaps the last chance in a decade.

Interestingly, Norton and Airley's paper reaches a startling conclusion. After conducting an extensive survey of voters of all political persuasions, the authors found across-the-board support for a much more equal distribution of wealth than the U.S. now has. This result was true of voters from both political parties, did not vary much by level of income, and was similar between men and women. If the U.S. Congress took its vow to represent the preferences of its citizens seriously, the repeal of Bush Era tax cuts would be a foregone conclusion.

Alternatively, we can hope that the folks in the ultra-wealthy sliver of Boomers voluntarily write a bunch of awfully big checks to the U.S. treasury. Gates and Buffet are recruiting their fellow billionaires to dedicate their fortunes to philanthropy, just as J. P. Morgan rallied his fellow financiers to bail out the United States in 1907. Perhaps Mssrs. Gates and Buffet can turn the U.S. government debt into their philanthropic cause?

Or perhaps compulsory national service deserves another look.

The views expressed in this article are strictly those of the author.