The National Debt's Looming Impact on Your Paycheck
WHY YOU SHOULD CARE
Because the numbers only seem abstract.
By Daniel Malloy
Fiscal hawk policymakers often liken the federal budget to a family spending plan — an analogy that’s too simplistic, in part because families don’t have to spend a big chunk of their incomes defending against potential invaders. But there is a direct relationship between federal spending habits and those of Average Janes. If the national debt stays on its present course …
An average family will be $16,000 worse off by 2047 because of a diminished economy.
Here’s why. Publicly held debt, now nearing $20 trillion (calculated in 2017 dollars), is at its highest level relative to the size of the economy since World War II, according to numbers crunched from the nonpartisan Congressional Budget Office. Thirty years from now, without a course correction, the debt will be 150 percent of the gross national product — by far a record amount, and a recipe for an ugly fiscal reckoning. The Peter G. Peterson Foundation, a New York-based nonprofit devoted to tackling the debt, took the CBO numbers and drilled down to what it meant for families by subtracting real GNP per person under the extended baseline from real GNP per person under a projection that keeps debt roughly stable as a share of the economy.
The long-term pocketbook impact is far from negligible. And the message might be breaking through, somewhat.
In the big picture, the red ink “would reduce national saving and income in the long term; increase the government’s interest costs, putting more pressure on the rest of the budget; limit lawmakers’ ability to respond to unforeseen events; and increase the likelihood of a fiscal crisis, an occurrence in which investors become unwilling to finance a government’s borrowing unless they are compensated with very high interest rates,” the CBO report said.
And yet Washington’s fiscal handwringers are sidelined. During the presidential campaign, Donald Trump suggested the U.S. could never default on the debt because it could just print more money. Congressional Republicans, who fretted about the debt during Barack Obama’s presidency, are more eager to cut taxes than deficits now that they’re in control. Consensus is building among Democrats for a single-payer health care system, which won’t come cheap. Many liberal thinkers argue the deficit does not matter when compared to shoring up the safety net and fighting inequality. For both parties, proposals to cut Medicare or Social Security — the two biggest budget line items, which will soar as more baby boomers retire — carry heavy political costs and are unlikely to pass.
That’s why advocates are turning to the generation that will be stuck with the bill decades from now. Up to Us runs a competition to build awareness about the national debt on college campuses. (Students from Jackson State in Mississippi won this year by hosting game nights such as “Debt Jeopardy.”) Hilary Allen, who conducts community management for the program, says it has reached 100,000 people since launching in 2011. It’s a hard sell to get campus activists excited about bond markets and unfunded liabilities, as opposed to environmental or social justice causes. “This is a completely different mindset for students, and for millennials specifically,” Allen says. “We don’t see it impacting our everyday lives. It seems like it’s negligible.”
Her point: The long-term pocketbook impact is far from negligible. And the message might be breaking through, somewhat. A poll conducted by the Peterson Foundation found that 72 percent of Americans think the national debt should be among the top three issues in Washington (though that number has declined from 81 percent last August). That’s a disconnect from the priorities of the White House and Congress. “It is disheartening,” Allen says. “But it also, I think, is justifying for our existence.”
* Correction: The original version of this story misstated the city where the Peterson Foundation is based.