Borrowing from our children
THE generation currently running America is made up of prodigal parents. Contrary to the Biblical story, we have enriched ourselves at the expense of our children. We have mortgaged their future to pay for our excesses. We inherited a rich country from our parents and we have bequeathed an encumbered country to our children. Consider the following: We have an accumulated federal deficit of $1.8 trillion -- an amount that has doubled in the last five years. A balanced federal budget is not even on the horizon.
For each dollar that we borrow at today's 10 percent interest rate, our children will pay $17 in compound interest and principal at the end of 30 years. This means that just for the 1984-85 deficit we have created an obligation that will cost $3 trillion by the year 2015.
From future income our children will have to pay a mass of unfunded liabilities -- $5.1 trillion in social security and $1 trillion in military benefits and civil service pensions.
Workers who retired in 1982 on social security receive, on an average, 3.5 times their investment in the program. But today's 30-year-olds will receive as little as 73 percent of their social security contributions.
The Congressional Research Service reports that more than 700,000 social security recipients have incomes of more than $50,000 a year. The median gross income for these recipients is $63,000 a year without their social security income. We are taxing today's working poor to transfer money to people who simply do not need it.
Today, some people retiring on medicare have actuarial benefits 28.6 times the sum they paid into the system. Medicare will impose enormous future costs.
We inherited from our parents a well-maintained and up-to-date infrastructure; however, we are leaving to our children an infrastructure that will require an estimated $3 trillion over the next 20 years to return it to an adequate state of repair and service.
My generation made mortgage money available at subsidized rates and long payback periods to make it easy for us to buy homes. This helped cause the rapid inflation of the 1970s. Now experts estimate that fewer than half of all Americans under 30 will ever own a home.
Since World War II, both the public and private sectors have been producing and inadequately disposing of hazardous waste. The Office of Technology Assessment estimates that it will cost up to $100 billion over the next 50 years to clean up approximately 10,000 sites where we have negligently dumped these toxic materials.
In 1961, people aged 25 to 34 spent an average of 13.58 percent of their after-tax income on shelter. By 1981, shelter consumed 22 percent of the group's after-tax income. In 1961, our household spent 61 percent of after-tax income on basic necessities; today, these necessities consume 74 percent of the earning of young families.
In 1970, 24 percent of our elderly and 16 percent of our young lived in poverty. By 1982, those figures had reversed. Only 15 percent of senior citizens were poor, but 23 percent of young people were poverty-stricken.
Each generation encounters its own historical challenge, the outcome of which leaves a legacy of opportunities and challenges for the next generation. We inherited abundance and opportunity; we are leaving mortgages and encumbrances. We failed to live off the interest of the wealth created by our parents and to preserve the principal for future generations.
Through our reluctance to make tough decisions today, we are bequeathing to our children even higher taxes than we have had to pay. Every year of political inaction means our children will have less money to spend on food, clothes, cars, housing, their children's education, and other elements of a decent standard of living.
We are fooling ourselves if we think we are borrowing from the banks. We are borrowing from our children and our grandchildren.
Indeed, our children are the gypped generation. Someday they will realize how unfair we've been to them. One of the major issues of the future will be intergenerational equity, when we are called by our children to account for our excesses.
Richard D. Lamm is governor of Colorado.