During the 2008 election John McCain admitted that economics wasn't his strong suit. His post-election statements demonstrate that this was a vast understatement. Unfortunately, he's now one of the leading voices in the GOP's opposition to Barack Obama's economic policies.
"During the Senate debate, 36 of the Senate Republicans voted for an alternative that would have cut taxes over the next decade by $2.5 trillion, [and] reduced the top marginal race to 25 percent," said the's Ron Brownstein on "Meet the Press." "For John McCain -- who voted for that alternative of a $2.5 trillion tax cut over the next decade -- to talk about generational theft, I mean, pot meet kettle."
And, of course, this is the same John McCain who argued during the 2008 campaign that the Bush tax cuts should be made permanent, which would cost $4.4 trillion -- more than five times the cost of the stimulus bill. So much for McCain's worries about "generational theft".
It is easy to see that the national debt is not really a measure of intergenerational burden. While the taxpayers collectively can be seen as owing the debt, taxpayers (or at least some of them) also own the debt. This is not a payment across generations; it is a payment within generations.
If the United States let the debt rise to $10 trillion and then left the debt at $10 trillion for 100 years, just paying the interest, then in 2108 some of our children, grandchildren and great grandchildren would be collecting the interest on the $10 trillion, which would be paid from the taxes that the government collects.
This flow of money from taxpayers to bond holders doesn’t on net make people better or worse off 100 years from now. It is simply a redistribution from some members of future generations to other members of future generations.
The important thing, Baker emphasizes, is what we do with the amount we borrowed:
Whether or not the debt has made future generations poorer will depend on how it was incurred. If we ran up debts so that we could finance schools and colleges, and make sure that our children and grandchildren were well educated, then we probably made them richer than if we didn’t run up debt but left them illiterate. Similarly, if we ran up the debt to construct a modern physical and information infrastructure, then we probably made future generations much wealthier than if we had handed them a country that was debt free, but had no Internet and no computers.
In short, the debt is not an accurate measure of whether we have been generous to or short-changed the generations that come after us. The answer to that question depends on the economy and society that we pass on. There are many scenarios in which we would have impoverished future generations, even if we were to hand them a government that is free of debt or alternatively left them very wealthy, even if there is a substantial government debt.
Despite demagogic Republican complaints about "pork" -- which in the aggregate never amounted to more than a few percent of the $800 billion total -- the stimulus bill includes huge investments in infrastructure that will benefit future generations. Fundamentally, though, the stimulus is intended to avert a deflationary spiral which would leave the next generation with a shattered, lifeless economy that would cost vastly more to resuscitate than our economy does today.