Pity the debt-paying generation
By Bill Beach and Dustin Siggins
The Heritage Foundation
The outlook for the Debt-Paying Generation - those young Americans on the hook for our monstrous national debt - keeps getting worse.
Take two developments in just in the last two months: First, the Congressional Budget Office released an update showing that since last year the amount of debt it expects America to carry (as a percentage of GDP) in 2035 has jumped significantly.
Second, Senate Majority Leader Harry Reid and House Speaker John Boehner each made it clear that they think cutting less than 10 percent of spending over the next 10 years is a responsible way to govern.
The CBO report continues a long series of annual warnings that the fiscal future is getting steadily grimmer: "Debt held by the public is now projected to grow even faster in the next decade under the alternative fiscal scenario than CBO projected last year. ... By 2021, it would exceed 100 percent of GDP, 10 percentage points higher than projected in 2010. In later years, debt would follow a path similar to what CBO projected last year, reaching almost 190 percent of GDP in 2035, effectively the same level as projected previously."
As columnist Peggy Noonan noted some months ago, part of the reason for the existence of the tea party is that compromise in Washington is often between moderates and liberals, not liberals and conservatives.
For example, the CBO said the initial phase of the Boehner compromise would take the debt per worker in 2021 from about $161,631 to about $156,324 - clearly, laughably inadequate. As one of us once wrote, "You can't balance the federal budget and stay inside today's policy lines. Rethink the lines, however, and you'll be amazed how quickly we could move toward fiscal sanity. It's all a matter of those tricky lines."
Thinking outside the lines is just why we are writing a book about the Debt-Paying Generation. It's also why Bill Beach was a lead author of a recent Heritage Foundation report on a plan to return to a balanced budget.
In that plan ("Saving the American Dream"), Heritage called for achieving permanent budget surpluses by 2021; pro-growth tax reform; and entitlement reform. While there is plenty of room for debating how we get to permanent total budget surpluses, the fact is that we need real solutions - and fast.
Heritage's plan is but one answer, but it is one that can work.
Unfortunately, except for rare exceptions such as Sens. Tom Coburn, R-Okla., and Rand Paul, R-Ky., both of whom have plans that would balance the budget sooner than anyone else on Capitol Hill, much of Washington would rather pay attention to the latest Washington sex scandal than worry about the real threat that is America's growing national debt.
When it really comes down to it, the budget debate can be reduced to the following points:
1. Reform our immoral and inefficient tax code, perhaps by replacing it with a flat expenditure tax, such as Heritage proposed. A strong period of economic growth will be needed to help lift us out of our fiscal mess, and the flat expenditure tax frees the economy to grow at its potential while supplying government with the revenues it needs.
2. Cut spending. To start, basically anything ending with "Department" or "Administration" should be closely scrutinized for need and effectiveness. Doubtless hundreds of billions in outlays each year could be saved by reforming broken programs and eliminating those that simply don't work. Entitlements, of course, must be reformed.
3. Shrink the size of government employee rolls. Fully one-sixth of America's workers are employed by some level of government, and when one adds the millions of defense and other contractors into the mix, more than 30 million people are employed by tax dollars. These are dollars that, instead of expanding the economic pie or tax revenue are simply recycled. We support cutting 10 percent of all government employees or contractors, to start.
As James Agresti recently noted in The Daily Caller, the longer that Americans bury their collective heads in the sand, the more extreme solutions will have to be. Today's seniors and near-seniors could have supported minor increases in retirement ages; partial or full privatization; or any of a number of other options 20 years ago to entitlements that would have made Medicare and Social Security better off today and in the foreseeable future. They could have voted for politicians who wanted a fair tax code instead of one riddled with special-interest loopholes.
Instead, the status quo was largely kept in place. Now solutions must be drastic if we are to prevent the Debt-Paying Generation from bearing the consequences of the decisions of their parents and grandparents.
About the writers
William Beach is director of the Center for Data Analysis at The Heritage Foundation. Dustin Siggins is a former policy researcher in the Center for Data Analysis at Heritage. Readers may write to the authors in care of The Heritage Foundation, 214 Massachusetts Avenue NE, Washington, D.C. 20002; Web site: www.heritage.org. Information about Heritage's funding may be found at http://www.heritage.org/about/reports.cfm.