You may be wondering whether anyone, after all, went over the fiscal cliff at the end of December. News reports about Congress’s last-second legislation certainly conveyed the impression that everyone stepped away from that fateful edge.
However, if you are under the age of 35, that rushing sound you hear right now is your financial future plummeting down the cliff face and into the valley of national debt. The truth for you is that the American Taxpayer Relief Act of 2012 serves as yet another dismal solution in a long string of unserious attempts to resolve our nation’s uncertain fiscal future.
All of the political posturing to avoid blame for a potentially self-induced recession resulted in $600 billion in tax hikes over 10 years and little to no spending cuts. The $60 billion a year in targeted taxes on “the rich” is merely a drop in the bucket against annual trillion-dollar deficits. The big loser in the “fiscal deal” was the generation that will spend their lives paying down tragically enormous levels of public debt. This debt payment burden will be so large in a few years that the future economy will be slower, the Debt-Paying Generation’s lifetime earnings will be smaller, and the quality of this generation’s life will be lower than any prior generation.
The name “Generation Y” has been given to the generation of young working adults under 35 who have been hit the hardest by the crippled job market. This generation of workers faces a bleak future that will most likely be “permanently depressed” by economic policies fabricated for their rhetorical qualities rather than their merits in producing economic opportunity and upward mobility. Since 2007, the average income for those aged 25–34 has fallen 8.2 percent—a decline twice as large as the 3.9 percent decline for the rest of the adult population. Even now, unemployment for those aged 20–24 and 25–34 remains at 13.7 percent and 7.7 percent, respectively—a stark contrast to the 6.1 percent unemployment rate for the rest of adults.
Where to place the blame? The most ominous opponent of the young working generation and economic stability is the size and trajectory of the national debt. Our nation’s debt currently weighs in at $16.4 trillion. By 2022, the debt is expected to balloon to $23.9 trillion. Even the postponed draconian sequestration cuts and the largest tax hike in history wouldn’t recoup the additional debt proposed by President Obama’s budget—a clear sign that we are not headed in the right direction, despite what Treasury Secretary nominee Jack Lew says.
What’s the cost of continuing business as usual? A 2010 study by the International Monetary Fund cited by the Stanford Institute for Economic Policy Research demonstrates that if current policies stay in place, our gross domestic product (GDP) will be 30.4 percent lower than the baseline in 2050. Imagine that. The wealth of our nation would be about $10 trillion less than if normal economic growth had occurred. To put this in perspective, the continued abdication of responsible budgeting would erase nearly 20 years of economic growth—two lost decades.
A government that fails to tackle the drivers of its debt will amplify the magnitude of its economic woes only to beget stagnant growth, fewer jobs, and more debt. Ignoring these problems will allow them to grow so large that they cannot be bestowed on any class—the wealthy, or the job creators—but only an entire generation.
The burden of this economic malfeasance will fall squarely on the shoulders of those under 30—the Debt-Paying Generation. Concentrating the economic hardship on the youngest generation will put our nation’s youth on a permanently lower path to success and fulfillment in life.
Consider it this way: Almost all of those in the Debt-Paying Generation are in school, just got out of school, or are thinking of going back soon. Part of the reason that they have an education is because their parents saved beyond their personal needs in order to invest in their children. It is a natural parental instinct to work more than you need to in order to give your kids more than you ever had. Given your forbears’ efforts and your own sweat, you should be able to thrive beyond their achievements. Likewise, it should be a natural instinct of the government to leave the nation better off than those previously in leadership did.
Sadly, our government overpromises so much that it must borrow 42 cents of every dollar that it spends. Rather than budgeting responsibly to build a sustainable future, our elected officials “conscript the wealth of future generations” to finance overspending today. The Debt-Paying Generation will be forced to work beyond their means, not to provide their children a better future, but to reimburse today’s unscrupulous politicians for their overindulgence.
If today’s struggles for Generation Y stemming from the recession are just a five-year blip in our nation’s history, imagine what’s in store for the Debt-Paying Generation.
Donald Schneider is a former member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm.