Racing against the clock this past December, Congress managed to score two last-minute wins: a historic tax reform bill and temporarily averting a government shutdown (just in time for the holiday recess).
However, as the scoreboard resets for 2018, it’s important to step back and consider that many of the major government funding challenges of our time remain unaddressed and continue to trend in the wrong direction. Worse still, this looming burden is set to disproportionately impact younger generations that seem to have little interest in — or fluency with — the policy hurdles ahead.
Four months ago, the reported national debt reached $20 trillion for the first time in our nation’s history. This marked a troubling milestone that received little attention amid partisan headlines. A similar phenomenon is now playing out as the media focuses on the impact of the new tax reform legislation but remains silent about adding $1 trillion to the deficit.
Our current representatives seem to have forgotten the spirit of fiscal responsibility. Mitt Romney has wisely noted the national debt is "America’s Nightmare Mortgage. It is adjustable, no-money down, and assigned to our children. Politicians have been trying to hide the truth about this nightmare mortgage for years — just like liar-loans.”
To make matters worse, one could argue the Treasury Department’s $20 trillion figure isn’t a reliable measure of the nation’s fiscal health as it doesn’t take into account sizable Social Security or Medicare liabilities. If the federal government were an audited corporation, it would be required to list analogous 401(k) and retirement promises on its balance sheet. The government, however, has decided that it does not need to follow the same standards as these corporations.
When you add up these various promises the government has made, the true national debt hovers around an astonishing $100 trillion. This figure may seem intangible, but it is a very real weight on the American public. Think of it this way: The federal government essentially has put $685,000 on every taxpayer’s credit card, with billions of dollars in interest accumulating on a daily basis.
This very issue also burdens state and municipal governments. The average state has accumulated a taxpayer burden of $10,020 — the dollar amount each taxpayer would have to pay to clear all their state’s debts, not to mention the average city’s taxpayer burden of $7,776, too.
The explosion of government debt represents an unprecedented transfer of wealth from younger generations to baby boomer retirees. Millennials see hefty Social Security and Medicare deductions on their pay stubs, but don’t realize this money isn’t being set aside to pay for their benefits. Entitlements are on an unsustainable trajectory; many predict they will have to be dramatically restructured soon to prevent failure.
I wish I could say our challenges are only political, but young people know as well as any the path ahead is muddied with other financial issues, such as the rising cost of buying a home and skyrocketing student loan debt. Education borrowing is more than just a personal finance issue — it also represents a $1 trillion question mark on the federal balance sheet. Roughly 40 percent of borrowers aren’t making payments on their college loans. That’s both a sign of bad times and a contributor to the imminent public policy challenges.
As we start this new year afresh, let's re-examine some of the areas in which the government seems to be living beyond its means. These financial issues are not going away anytime soon, and nobody has more on the line than young people. Young workers are currently paying higher taxes to finance baby boomers’ retirements, and they will continue to have to foot the bill for the debt their elders have accumulated.