The largest generation, now called Millennials, born in the 1980s and 1990s, face a personal and federal debt level that can’t possibly be paid off in their lifetime. Their parents, the next-largest generation known as baby boomers, created this debt impasse to pass on to future generations.
Just the amount of interest paid on debt by consumers and the federal government could provide better education for our children, health care for our seniors and city infrastructure. I haven’t seen an estimate of the annual borrowing cost, but the interest on $17 trillion of federal debt, over $1 trillion on student loans and a slightly lesser amount on credit card debt have to be mind boggling.
Veteran columnist Robert Samuelson wrote an informative accounting in The Washington Post of how we got into this financial crunch that will affect every household for decades to come. He used some key statistics comparing 1955 to 2012. His criteria focused on the flip-flop of economic markers defining a slowing economy during those 57 years.
For instance, credit cards, home equity loans, 30-year mortgages and long-term auto loans were rare in 1955. Household debt then was 49 percent of Americans’ disposable income, but it was 137 percent in 2007. Need I say more?
Well, let’s compare federal spending. In 1955 entitlements (that’s a nice word for welfare) were 22 percent of federal spending. By 2012 it was 66 percent. Who would ever have predicted a federal national debt of nearly $17 trillion? That’s about to increase when Congress agrees on a new debt ceiling.
What caused such a significant increase? Medicare, Medicaid, food stamps and disability programs were creations of the booming post-World War II economy. Education at a public university was virtually free. “An aging population eligible for Social Security and Medicare has outrun our willingness to be taxed,” Samuelson noted.
That’s true about the future of more takers than givers for Social Security, but don’t forget it was our payroll withholding and the employers who funded our retirement benefit, not the government.
That’s why we had a government shutdown and strife over raising the debt ceiling. While government officials expect a stronger economy to ease the annual deficits, it is plausible that slow growth will persist. It’s like the chicken-and-egg theory.
Unfortunately, we survivors of the Great Depression generation can still remember the way we were during our early productive years. That was before television, computers, cellphones and other electronic devices. Try to explain to your grandchildren that we actually paid cash for most of the things we bought. Only commercial businesses had credit for operation.
With high school and college graduating classes tapering off, the expectation of a surging economy to support the aging population is dreaming. It’s the same in Europe, Japan and even China. America is slightly better off because immigration provides more youth. Birthrates among Millennials worldwide are below standards.
Economist Stephen King writes in his book “When Money Runs Out” that our society is not geared for a world of low growth, and prosperity is no longer guaranteed. This is confirmed by the current political firestorm in Washington, D.C., Samuelson concluded.
Congress cobbled together a compromise bill to open government operations and to defer the debt limit increase. It was a partial victory for President Obama and the Democratic Party considering that the conservative Republicans failed to kill or even to delay the Affordable Care Act.
I consider the plan to re-enter the debate on the federal debt ceiling after the first of the year is just another case of kicking the can down the street.
Ford is a freelance writer in San Diego. He can be reached at firstname.lastname@example.org