Three Reasons Why Young People Should Care About the Growing Debt
A national debt of over $16 trillion matters to every American, especially young people. The spendthrift ways of Congress and previous generations have left today’s youth to shoulder the consequences of out-of-control federal spending on entitlement programs—consequences that impact your income and employment prospects.
During the debate in 2011 over whether to raise the debt ceiling, one of the proposed solutions was to raise taxes to reduce the deficit. Policymakers and economists are currently debating the merits of letting taxes increase dramatically at the end of 2012 and allowing the country to fall off the dreaded “fiscal cliff.”
That doesn’t mean raising taxes is a good idea–even former Clinton chief of staff Erskine Bowles has warned that we can’t tax our way out of debt. Young people are already earning less than their parents’ generation—those earnings could shrink further if tax rates dramatically increase.
The unemployment rate for young adults is already higher than the overall unemployment rate. And a growing national debt could make the situation worse. Research indicates that a country’s economic growth slows when the government accumulates too much debt. If the economy is growing more slowly, it means fewer goods and services are being produced, and fewer jobs are needed to produce them.
In other countries that have struggled with out-of-control national debt, governments have printed money to pay it off. While this sounds like a simple and cost-free solution, printing additional currency can cause inflation—or, even worse, hyperinflation. In Argentina, for example, the government printed money to pay its debt only to experience inflation so immense that one Argentine peso in 1992 was the equivalent of 100 billion pesos prior to 1983.
For young people, inflation or hyperinflation in the United States could wipe away the value of their savings.