The federal debt, as a percentage of gross domestic product, hit an all-time high of 118.9% in 1946 because of government spending on World War II. It's now about 102% and projected to grow higher.
To address the debt, the Greatest Generation – those who grew up during the Great Depression and won World War II – did two things when they returned. They supported decreased federal spending, primarily defense, and higher taxes.
Reducing defense spending was, a function of the end of the war. Nevertheless, the Greatest Generation had less government than we do: No Department of Health and Human Services, no Housing and Urban Development, no departments of Transportation, Energy, Education, Veterans Affairs, Homeland Security.
And they paid more in taxes. The maximum tax rate in 1945 was 94% on taxable income over $200,000. Adjusted for inflation, that's $2.6 million. The top tax rate fell to 82.1% in 1948 but rose again to 91% in 1951 and stayed there through 1963.
By 1981, the debt had fallen to 31.7% of GDP – in part because the economy had grown an average 3.7% a year from 1951 through 1981 despite high tax rates. (It has grown at a 2.8% annual rate from 1981 through 2013.)
Members of the Greatest Generation also were willing to compromise. While no one likes higher taxes, they did so when national circumstances made it necessary, such as when President Johnson levied a 10% surtax to fund the Vietnam War. He also agreed, reluctantly, to a 10% reduction in discretionary spending.
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By the time President George H.W. Bush agreed to higher taxes because he felt it was the right thing to do, given the nation's financ! es, he couldn't get Congress to agree on reducing spending. He signed the tax increase anyway, and paid for it with his job in 1992.
Today, members of Congress willing to give up a something to get something for the greater good are rare. In part, that's the fault of the people who elect them.
The Greatest Generation also had a sense of shared sacrifice. America has fought two wars since 2000, and most of us haven't paid an extra dime in taxes for the wars or for the care of the small percentage of the population who did the fighting. Most Americans – particularly wealthy people who have benefited most from tax cuts – feel overtaxed, according to a Gallup poll released Monday.
Unfortunately, cutting government spending involves sacrifice, an unpleasant notion. The most popular suggestion for cutting spending is foreign aid, yet it accounts for just 1% of the federal budget.
Popular programs such as health care, income for the elderly (such as Social Security), and defense, account for 73% of the budget. All other government functions combined total $908 billion. Most likely, only a combination of cuts to the most popular programs and tax increases will bring the budget closer to balance.
The Greatest Generation isn't entirely blameless in our nation's fiscal woes. The government's involvement in income and health care for the elderly was largely their idea. Having lived through the Great Depression, the Greatest Generation realized that anyone could fall upon hard times.
And having lived through World War II, they knew that the world is a dangerous place, and that the cost of a large military is an enormous debt to the men and women who do the fighting, bleeding and dying. What we can learn from the Greatest Generation on Tax Day is that there are far worse things in the world than making compromises and sharing sacrifices.
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