Debt Ceiling 2013: Why Millennials Are About to Lose Big
Thomas Jefferson once said, "The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." Millennials may be the first in our history to inherit a country in worse economic shape than the generation before. If nothing changes our future will be one of higher debt, fewer jobs and a lower standard of living. Here are five ways that our generation is getting swindled.
1. You mean Washington isn’t telling the whole truth?
The true size of the nation’s debt problem is not $17 trillion. It is $200 trillion. That’s the full tab we are going to inherit. This measure, the fiscal gap, takes into account all the future promises government has made but not funded. These include debt payments, veterans’ benefits, and social insurance programs.
2. Sounds scary. Let’s just wait.
The longer our country waits to address its long-term budget imbalance, the greater the burden will be on young people. If we wait 20 years instead of acting now, the necessary tax increases alone would go from a 54.8% increase to 65.3%. The other option is to only cut spending by 36.2% today or 41.2% in 2033. Of course, a mixture of the two would be better than focusing on only one.
3. I thought we were done picking winners and losers?
Millennials and future Americans have a higher net tax burden than any other generation. Unlike older Americans who will collect more in benefits than they've paid in taxes over the course of their lifetime, we will be stuck with a giant bill. A 65-year-old today will end up getting $327,400 more in benefits than they paid in over their lifetime. Today’s 25 year old will contribute $25,800 more than they will ever get back.
4. “Back in the good ol’ days, we actually cared about the future.”
Changes in government spending have resulted in a shift from investment in the future to consumption in the present. Seniors' share of the pie is growing, while our share is shrinking. In 1969, the federal government spent almost the exact same on transfer payments to individuals (Social Security, Medicare, Medicaid, etc.) as it did on investments (education, research, and infrastructure). Today, about 66.2% of all the government’s spending goes to payments compared to 13.7% used for investments.
5. Yeah, we’ll get right on that.
Millennials cannot bear the burden being handed to them due to the economic challenges we’re already facing. Our effective unemployment rate is 16% and many with jobs are underemployed. This translates into lost wages, which is a problem because two thirds of wage gains are made in the first 10 years of your career. This could mean as much as $100,000 in lost wages.
6. So how do we fix this?
Washington needs to hear that the federal government cannot continue to spend its money like a drunken sailor. We need to reach out to our lawmakers and urge them to fix our national debt. The solution is a “Grand Generational Bargain” that resolves the political stalemate by trading-off between increased, short-term spending on investments and long-term savings by fixing entitlements. Some fair tax reform would be nice, too.
Learn more about these and other eye opening facts at swindled.thecankicksback.org.