Our Children Will Be Lucky To Inherit Federal Debt & Federal Assets

Kurt Brouwer February 9th, 2008

No doubt you have read and heard many complaints about our enormous Federal government debt and how we are saddling our children with this debt (see National Debt At $9 Trillion). This line of reasoning gets lots of attention, but it conveniently ignores the most important part of the story. It ignores the fact that our children will also inherit assets worth more than the debt.

Just one quick example should suffice to make the point. Have you ever driven on our interstate highway system? You know, I-80, I-75 I-95, I-40, I-75 or H1 (Hawaii).

Well, this system was made possible by Federal spending beginning in 1956 and continuing on for decades. The actual cost was about $135 billion, give or take a few billion. But, the cost in current dollars would be several hundred billion dollars. Actually, it would be much more because building this today would involve buying out all the property owners along the way at today’s real estate prices.

So, we inherited the debt that was incurred for building this system, yet we also inherited the system itself, with all its benefits. That is, we inherited an asset that was worth much more than the debt associated with it.

In this map, the blue lines are all interstate highways. The red line is I-80 on which I travel on all the time. Can anyone suggest this was not a good investment? So, let’s not get carried away with the idea that we are saddling the next generation with debt, but no assets. That’s just false.
interstate-highway-80-290px-interstate_80_map.png

Source: Wikipedia

Let’s say you concede that the interstate highway system was a good thing and you are happy that President Eisenhower and other visionary leaders pushed it through, but you think most government spending was wasted. While it is true that our government wastes money frequently, the fact remains that the debt we have incurred paid for much of the infrastructure of our country and its government. And, in my opinion this infrastructure is worth much more than the debt incurred to build it.

Now, don’t get me wrong. I believe our Federal government wastes too much money. And, it often undertake programs for which it is ill-suited. Therefore, in my opinion we need more restraint, judgment and discernment when it comes to spending our tax dollars. Nonetheless, we have to give credit where it is due.

So, let’s acknowledge the fact that, along with $9 trillion (actually $9.6 trillion now) of debt, our children and grandchildren will also inherit many assets. I’m not talking about our freedom or liberty or the opportunity to live here because those are priceless. No, I am talking about real hard assets.

We already mentioned the interstate highway system. But, also consider that the next generation will benefit from the most incredible national parks system in the world, millions of acres of Federally-owned land with rich forests, mineral deposits and oil & gas resources. Then there are hundreds of military bases and diverse defense capabilities, not to mention Fort Knox (and its gold), the U.S. Treasury and its bonds plus thousands of office buildings and many other assets. And those are just hard assets. What about the Federal court system, patent system and food and drug testing.

I could go on, but I won’t. But please do me a favor. The next time you hear someone complain about Federal government debt, just ask him how much he paid for his last trip on the interstate.

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4 Responses to “Our Children Will Be Lucky To Inherit Federal Debt & Federal Assets”

  1. Joeon 09 Feb 2008 at 3:30 pm

    Some people claim that our so called enormus debt, as a percentage of GNP, is histoically in line and manageable. Is this true, and if so where can one find nonpartisan proof?

  2. Kurt Brouweron 10 Feb 2008 at 9:53 am

    Go to the link in the first paragraph of this post. Currently, our national debt is about 66% of GDP. It has been much higher than that. Also, it is lower than many countries such as Japan. Also, remember that about 40% of our debt is owed by one agency of government to another agency.

  3. Thomas Dinsmoreon 11 Feb 2008 at 6:47 am

    It all boils down to where the money goes, no? If I run up debt to finance my vacation, that is irresponsible. But if I run up debt to buy my primary home or to invest in a business, that is a smart thing to do because of the future stream of benefits.

    The problem today is that too much government spending goes to current operations rather than real investments.

  4. Kurt Brouweron 11 Feb 2008 at 7:50 am

    Good point Thomas. To expand on that point, people should understand that there is no capitalization of long-term investments as you would have on a business balance sheet. Current operational expenses are overstated in the sense that no distinction is made between paying the electric bill for an office building or paying the construction costs of building that building.

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