With the government now shut down, the two words on everyone’s lips these days are "federal budget." This week, Republicans have shifted their game strategy from defunding Obamacare to raising the debt ceiling. How to pay off the government’s debt is something that neither party has been able to agree on, which makes a piece of legislation like the Intergenerational Financial Obligations Reform (INFORM) Act not only important, but timely.
According to the INFORM Act website, the bill calls for the Congressional Budget Office, the General Accountability Office (GAO), and the Office of Management and Budget (OMB) to perform annual generational and gap accounting, and provide generational accounting for proposed legislation. Such accounting would probably be able to determine who is shouldering the burden of subsidies, which would be enough information to help legislators reach compromises more quickly. Los Angeles Times columnist Michael Hiltzik unleashed damning criticism of the INFORM Act in his column on September 17, stating that generational accounting doesn’t distinguish between spending and investment: “The government's decision in the 1950s to spend billions to create the interstate highway system shows up in generational accounts as a huge burden on post-1950s taxpayers…But we're obviously reaping economic benefits from that decision, as will our children and grandchildren.”
Laurence Kotlikoff replied by releasing an eloquent defense via Forbes: “The objective is to understand which generations will pay for those public goods and other government spending… Yet we can’t make those decisions until we understand who will likely pay for them.” Kotlikoff is right. The INFORM Act, if passed, will provide invaluable insight into the fiscal consequences of government spending. Instead of using the comfortable 10-year projection as a measuring stick for long-term viability, gap and generational accounting will help lawmakers understand how government expenditures will affect current and subsequent generations.
Not only is the INFORM Act a bipartisan initiative that was introduced and sponsored by Democratic and Republican senators, showing both sides of the aisle are on board, an all-star team of economists has given it a seal of approval. Fourteen Nobel laureates in economics have endorsed it thus far, in addition to over a thousand other economists from around the world. Such a consensus raises the question of whether the INFORM Act is based less on sound economic theory than common sense. Indeed, the principle of the bill is simple enough that anyone can understand it: You have to count the money you have spent along with the money you haven’t. Doing so allows you to know not only how much money you are actually spending, but also who is spending it. While the INFORM Act cannot predict who shoulders what publicly funded project with complete accuracy, in this instance, more information is better. Simply put, generational accounting is more thorough and transparent.
One of the motivating factors behind the INFORM Act is the student debt that is crushing millennials and preventing them from reaching the financial milestones of adulthood. To add insult to injury, the current structure of Social Security and Medicaid benefits the Baby Boomer generation, putting them in the unique position of being more financially secure than their parents and their children. Hitzkin may have eloquently crafted his argument, but the facts remain: Student debt totals over $1 trillion, exceeding consumer debt, and the average college graduate is saddled with $26,000 in student loans. Earlier this year, The Can Kicks Back, a nonpartisan millennial organization dedicated to advocating for viable debt solutions, proposed a policy that provides greater budget transparency and intergenerational accounting. The INFORM Act will ensure both those things, and take away Congress’s ability to pass the buck.
Bills like the INFORM Act are the perfect example of why we have elected members of Congress — to come up with viable solutions addressing problems that are pressing to millions of Americans. The INFORM Act is a necessary piece of legislation designed to prevent the debt yoke burdening millennials from happening again. This bill needs to pass for the sake of millennials’ future and for the generations that come after them.