With no immediate solutions on the horizon, the burden of debt will undoubtedly fall to young Americans who will be expected to pay it off in the future.
To discuss this important issue, Generation Opportunity Policy Director David Barnes joined a panel hosted by the Heritage Foundation’s Romina Boccia, featuring the Manhattan Institute’s Brian Riedl and Cato Institute’s Michael Tanner.
CLICK HERE TO WATCH THE FULL DISCUSSION
Where Did Our Debt Come From?
The panel discussed the causes of our national debt: recessions, big-spending from presidential administrations over the years and the growing costs of entitlements like Social Security, Medicaid and Medicare.
Barnes debunked misconceptions that our debt comes mostly from foreign aid or government employee paychecks, describing entitlements like Social Security, as the real drivers of our debt.
He discussed how the changing age demographics have impacted entitlement programs like Social Security:
I think you can really see that these programs were designed and structured during a time where our population pyramid looked very differently and you had a much larger percentage of young working people compared to the older retired generation and that’s been changing significantly…I think it’s one of the critical challenges that these programs have not been designed with demographic realities and also fiscal realities in mind…so we are overspending on entitlement programs.
He then described the lack of incentives for lawmakers to address these programs driving our debt, as they tend to prioritize appealing to voters in the short-term over proposing long-term solutions.
The Ever-Increasing Debt
The CBO estimates that if left on its current trajectory, the national debt will rise from $20 trillion to $92 trillion in the next 30 years.
In addition, our current interest rates are low. Once interest rates inevitably rise, the debt will rise along with it leading to skyrocketing costs for the youngest generation of Americans.
Cato’s Michael Tanner discussed the impact of the debt on young people in the future:
In terms of young people, they’re going to have to pay off this debt and they will ultimately have reduced resources. The Congressional Budget Office indicates that young people mid-century will have income three to five thousand dollars less a year than they would if this debt didn’t exist.
Getting Out of Debt
While some progressive policymakers suggest tax the rich schemes as a solution, the truth is America cannot tax its way out of debt.
Taxing the rich would never create enough revenue to pay off the entirety of our debt, and the government would inevitably expand to taxing the middle class.
Barnes elaborated: since young people make less than those in older generations, payroll tax is typically the biggest tax they pay. Tax increases would hurt them the most.
Increasing the tax burden would also discourage economic growth. Companies would create fewer jobs, hire less workers, cut hours and pay less to workers already employed.
The Way Forward
The growing national debt should concern for all Americans, especially those in younger generations who will be forced to pay for it down the road.
It’s time for government to get serious about this issue. We can start by reining in excessive spending and tackling large government entitlement programs to restore our country’s fiscal future.
As Barnes noted, we need to hold our policymakers accountable and show that the national debt is an especially important issue for all young Americans.
Watch the full recording of the panel here.