Here's an interesting quote from Luther as to what happens to child who is not baptized. In his treatise, Concerning Rebaptism (1528), Luther presents a number of reasons why "Anabaptism" is wrong:
First, because child baptism derives from the apostles and has been practiced since the days of the apostles. We cannot oppose it, but must let it continue, since no one has yet been able to prove that in baptism children do not believe or that such baptism is wrong. For even if I were not sure that they believed, yet for my conscience’s sake I would have to let them be baptized. I would much rather allow them baptism than to keep them from it. For if, as we believe, baptism is right and useful and brings the children to salvation, and I then did away with it, then I would be responsible for all the children who were lost because they were unbaptized—a cruel and terrible thing. If baptism is not right, that is, without value or help to the children, then I would be guilty of no greater sin than the Word of God had been spoken and his sign given in vain. I would not be responsible for the loss of any soul, but only of an ineffectual use of the Word and sign of God. (LW 40:254)Luther's position in not quite the Roman Catholic position. For Romanism, a child receives grace in baptism without faith. Luther states in a Postil sermon:
This they have inferred from the former opinion, that little children receive grace in this way without faith, solely by the virtue and power of the sacrament, as, they dream. Therefore they also ascribe the same thing to adults and to all men, and utter such things from their own mind, and thereby they have in a masterly way eradicated and made void and unnecessary the Christian faith, and have set up human works alone by virtue of the power of the sacraments.Of course, Rome has an entire theological development on what happens to an unbaptized infant. There was "Limbo" up until fairly recently. Self-proclaimed interpreter of Romanism Jimmy Akin commenting on Rome's recent Limbo development states,
The document that the International Theological Commission has been working on concerning limbo has now been published. AS ANTICIPATED, it casts doubt on the doctrine of limbo without claiming anything certain regarding the fate of infants dying without baptism, instead encouraging an attitude of hope regarding their salvation.This is in line with the development of Catholic thought in the last few decades regarding the fate of such children, as well as the discussion of their fate in the Catechism.
Addendum: The Most Effective Baptism is Infant Baptism
For Luther, the most effective baptism was infant baptism:
I maintain as I have written in the Postil that the most certain form of baptism is child baptism. For an adult might deceive and come to Christ as a Judas and have himself baptized. But a child cannot deceive. He comes to Christ in baptism, as John came to him, and as the children were brought to him, that his word and work might be effective in them, move them, and make them holy, because his Word and work cannot be without fruit. Yet it has this effect alone in the child. Were it to fail here it would fail everywhere and be in vain, which is impossible. (LW 40:244)And in his Postil sermon:
Therefore we here conclude and declare that in baptism the children themselves believe and have their own faith, which God effects in them through the sponsors, when in the faith of the Christian church they intercede for them and bring them to baptism. And this is what we call the power of alien faith: not that anybody can be saved by it, but that through it as an intercession and aid he can obtain from God himself his own faith, by which he is saved.
32. So here we also say, that children are not baptized in the faith of the sponsors or of the church; but the faith of sponsors and of the church prays and gains faith for them, in which they are baptized and believe for themselves. For this we have strong and firm Scripture proof, Mt 19,13-15; Mk 10, 13-16; Lk 18, 15-16. When some brought little children to the Lord Jesus that he should touch them, and the disciples forbade them, he rebuked the disciples, and embraced the children, and laid his hands upon them and blessed them, and said: "To such belongeth the kingdom of God" etc. These passages nobody will take from us, nor refute with good proof. For here is written: Christ will permit no one to forbid that little children should be brought to him; nay, be bids them to be brought to him, and blesses them and gives to them the kingdom of heaven. Let us give due heed to this Scripture...
So we also say here, that children are brought to baptism by the faith and work of others; but when they get there and the pastor or baptizer deals with them in Christ's stead, he blesses them and grants to them the faith and the kingdom of heaven: for the word and deed of the pastor are the word and work of Christ himself.I think it's interesting that Luther limits the power and efficacy of baptism. He staunchly maintains the absolute power of baptism in infant baptism, but yet limits the power of baptism in adults:
I think, if any baptism is certain, the baptism of children is most certain, because of the Word of Christ, where he commands to bring them, whereas the adults come of themselves. In adults there may be deception because of the reason that is manifest; but in children there can be no deception, because of their hidden reason, in whom Christ works his blessing, even as he has bidden them to be brought to himself. It is a glorious word and not to be treated lightly, that he commands us to bring the children to him, and rebukes those who forbid it.Typically my blog entries on Luther are interested in simply presenting the historical evidence. Whether or not I agree with Luther's position is irrelevant. I personally don't follow Luther's reasoning here (and yes, my position is still irrelevant!). Since when is the regenerating power of God thwarted by a human will? I think if Luther were consistent here, an unbelieving adult being baptized (whose family and church were praying for him as in, "the faith of sponsors and of the church prays and gains faith for them," that person, according to Luther, should similarly receive the gift of faith.
Here's an interesting link as well: Sola Fide Compromised? Martin Luther and the Doctrine of Baptism. One may disagree with the conclusions of the author, but he does a good job laying out Luther's position on baptism.