When millennials go to the polls, there is often a lot more on our minds than the federal budget. That needs to change. It may not be the sexiest topic, but the federal budget is more than just a bunch of numbers on a spreadsheet: it’s a reflection of our priorities as a nation. The more we value something, the more money we’re going to spend on it. And when it comes to the future of our country, there are few issues that will have a greater impact than our tax and spending decisions.
Spending on investments like education, infrastructure, and scientific research all have the potential to strengthen our economy in the long run. That means more jobs, a higher standard of living, and a more prosperous future for our generation. Unfortunately, the part of the federal budget that pays for these investments (the “domestic discretionary budget”) is shrinking to historic lows because our elected officials have been unwilling to make hard choices.
The country is undergoing a demographic transition as our parents’ generation, the baby boomers, retires. Programs like Medicare and Social Security, which today make up about 40% of the federal budget, are expected to grow rapidly as a result. Whereas in 1965 there were four workers paying for the benefits of every retiree, today that ratio is three to one and is projected to shrink to just two to one by 2035.
Congress and the President should agree to raise taxes to pay for these programs, reduce spending to a more sustainable level, or some combination of the two. The only other alternatives are to make deeper cuts to investments in our future or borrow money to make up the difference between revenues and spending. While the latter option may sound like a simple solution, this would add to our national debt, which today already stands at about $18 trillion.
Why does the debt threaten our generation? One word: interest. Each year, we pay interest on our debt to creditors. The two factors that determine the cost of interest payments are the size of our deficits (how much money we need to borrow) and the market demand for US debt (how willing investors are to buy treasury bills and lend us money).
When we accumulate more debt, we end up increasing both the percentage of it that investors want in interest and the total amount we end up having to pay that interest on. And each year that we run deficits, we need to take on more debt to pay the increasing interest, turning it into a vicious cycle of exponentially increasing costs.
This cost of interest is basically wasted money. Every dollar spent on interest is a dollar we can’t spend on investments in schools, roads, national security, scientific research, healthcare, or the social safety net. In fact, at the current rate we’re going, we will be spending more money on interest than the entire discretionary budget (including defense) within the next two decades.
The only way we can stop this trend is by demanding action from Washington. If millennials show up to the polls and make fiscal responsibility a top priority, our elected officials will have to act to address it. We have a responsibility to ourselves and to the generations who will come after us. It’s our future and it’s up to us to protect it.