The Debt-Paying Generation Has Arrived

In the near future, The Heritage Foundation’s Bill Beach and I will officially introduce the soon-to-be-important term “The Debt-Paying Generation,” (DPG) a term that all Americans should become familiar with. It is the financial future of America, and not a pretty one at that.

What is the DPG? It is those Americans who are presently between 5 and 30, and will be hardest hit from childhood through death by the debt irresponsibility in Washington. According to calculations broken down from Census Bureau data, the DPG is approximately 35% of the total American population, and currently stands at 108,670,000. Given expected life spans- nearly 80 years old on average, and having increased an average of three years since 1990- it is not impossible to believe that the DPG will be the longest-lived generation in American history.

Why is this age group being named the “Debt-Paying Generation?” Well, primarily because this generation will almost certainly have to pay down most of our national debt through higher taxes, which almost certainly will relegate them to the status of being  the first generation of Americans to live a worse life than its immediate predecessors. Additionally, to rub salt in the wound, the big three entitlement programs—Social Security, Medicare, and Medicaid—will have to be cut and, thus, will pay less to the Debt Paying Generation than the Boomers.

In short, to summarize an upcoming Heritage Foundation paper on the subject, a huge population of Americans will be financially burdened, and their quality of lives diminished, because of errors and dereliction of duty by Members of Congress and presidents in both parties. (Full disclosure: I worked for two months at Heritage on said paper.)

When I interviewed Rep. Michele Bachmann (R-MN) for this site, I asked her about the DPG. She expounded upon how much debt is being added by the Democrats, and how it is demoralizing to young people. According to Bachmann,

I will tell you, anywhere I go to speak, I ask that question. “Do you believe you live better than your parents?” Almost everyone in the audience puts their hand up. I ask them, “do you think your children will live better than you financially?” Virtually no one puts their hands up. I doubt in the last 234 years, if you ask that question of any generation, that they would think that their children would not be better off than they are; I just don’t think that you would have gotten that response. That’s really what is frightening today, because we’ve always been a country that’s been about forward- looking people, and growth. And this is one of the first times when Americans look into the future, and they see diminished way of life, and they see decline.

It is not only Democrats, of course, who are at fault. Republicans voted in unpaid-for Medicare legislation; tax cuts that added to the debt, according to the Congressional Budget Office; and launched a War on Terror that, according to the Congressional Research Service, had cost over $900 billion as of September 2009. Additionally, few Republicans are willing to address our overall defense spending, which increased between 2001 and 2008 by over 90%, not including inflation. However, the real problem is the unwillingness of both parties to address our growing entitlements which, according to the International Monetary Fund (IMF), need to be cut by 12% of GDP by 2015 in order to keep the debt manageable. (This equals just over $400 billion in annual cuts at the federal level, in 2012 dollars.) In absence of this courage, of course, tax hikes (or “revenues,” in the election-year language of Democrats) will be necessary, and the level of taxation will just devastate the DPG.

Unfortunately, I do not see the political will in Congress necessary to make the changes the IMF recommended. From the Beach/Siggins essay:

The IMF recommendations would consist of Congress eliminating, in 2012 dollars:

• 57% of defense; or, if Congress keeps the full defense budget,
• Over twice the interest payments for next year; or, for a third option,
• Over 30% more than the president’s entire proposed Medicaid budget.

Each of these would have to happen every year until 2015. Of course, Congress could simply eliminate the entire discretionary budget; all of Social Security; and two-thirds of the interest payments for FY 2011  (well, except that not paying the debt’s interest would be to default on the debt itself) to reach the same total cuts this year, and leave the budget in other years untouched.

Medicare and Medicaid are necessarily the biggest concern of budget hawks, especially those who look decades into America’s financial future. Not far behind, however is Social Security. I recently conducted an interview with James Agresti, the founder of Just Facts, a New Jersey-based think tank, about Social Security and its impact on the National Debt. James- who regularly updates the burden of the national debt on Americans on his website- informed me that the Social Security Administration (SSA) may be misrepresenting the solvency of Social Security. According to James,

[I]n 2001, the Social Security Administration projected the trust fund balance would reach $2.54 trillion by the end of 2007. It actually reached $2.24 trillion- 13 percent lower than projected. Yet, if you compare the projections from the 2001 report and the 2008 report, they’re more optimistic in the 2008 report than in the 2001 report. So the financial condition of the Social Security program is worse than they projected…but yet they are saying it’s going to be better in the future. So in 2001 they were saying, [with] expected annual deficit in 2075, we’d have to increase Social Security taxes by about 49 percent to cover that deficit. In 2008, they said we’ll only have to increase taxes by 32 percent.

On April 15, The Center for American Progress noted that in President Obama’s proposed Fiscal Year 2011 budget, Social Security, Medicare and Medicaid add up to 41.5% of the federal budget. That is expected to grow astronomically over the next 70 years, under current budget proposals and with Congress’ current intestinal fortitude. Unfortunately, it won’t be these politicians who suffer- it will be their kids and grandchildren. To paraphrase a columnist from the Center for American Progress in The Washington Post some weeks ago, we need a generation of politicians who don’t care about being re-elected, and will thus make the tough choices. Hopefully, the American people vote in such politicians this fall, and in 2012, to prevent America from having its own Greek Tragedy, riots and all.