And does Kinsley think the idea of reducing the national debt is new? Actually it’s been around since the debt itself started growing, around 1790. The only actual effort to pay it off in full, under Andrew Jackson in 1835, was followed by a depression that brought the debt right back. Since 1960, three times our leaders have tried to balance the budget and so reduce the debt. Each time, in 1969, 1980, and again in 2000, guess what happened? Recession. Why? Because running a budget surplus means draining funds from private businesses and families. The textbooks used to call this “fiscal drag.” It just isn’t smart.
Nor is the present public debt close to being a record. In relation to our annual output it was much higher in 1946—that would be the year after the Greatest Generation won World War II. (Disclosure of a well-known fact: My father had a strong hand in economic management in the war years.) Did calamity follow? No. For a third of a century after the war, the debt-to-output ratio just gradually declined. By 1980 it was too low, which caused some problems. But then Ronald Reagan—who was another Greatest Generation guy, or who at least played one in the movies—came along and fixed that.
It’s true that we have got big economic problems right now. But the budget deficit and the public debt aren't among them. Kinsley just assumes they are, adding to the mountain of confusion already piled onto this topic. I hope his response will take up each of these points and rebut them—if he can.
Let's move on to Kinsley’s estate tax idea.
The actual and proper function of our estate tax is not mainly to demolish great fortunes. Nor is it to raise revenue for the government. It’s to encourage donations to churches, hospitals, universities, and other non-profits. At this the tax has been a spectacular success—not because people pay it but because they mostly don’t. Thanks to our system of estate-tax socialism, our richest citizens actually participate in civic life, earning honor through charity abetted by tax breaks. And the non-profits they help fund provide about 8 percent of all American jobs.
But for this system to work, the estate tax must impose high rates on great fortunes. Conversely, it should leave ordinary working people alone. Kinsley’s proposal—in fact a terrific boon for a few Boomers like Bill Gates—is the exact opposite of what we need.
As for the notion that a “typical” American spouse leaves a cool half-million behind, only someone too lazy to distinguish a mean from a median could believe that. In 2004 according to the Federal Reserve mean family net worth for households with a head aged 65-74 was $690,900—I couldn’t find where Kinsley got his $1 million—and the median value was only $190,100. This includes housing wealth, and those values would be lower today. Numbers are numbing, as Kinsley said.