An “Unsustainable” Path

Congressional Budget Office Director Douglas Elmendorf recently wrote that:

Under current law, the federal budget is on an unsustainable path, because federal debt will continue to grow much faster than the economy over the long run.

He also cites the many difficulties we face in charting a different fiscal course.The baby boomer generation is getting older which will drastically increase the cost of health care for the aging population. As they retire our taxpayer-to-entitlement recipient ratio will fall below sustainable levels. To cover the difference annual deficits will spiral upwards. Interest payments on the ballooning debt will consume more and more taxpayer dollars. Over time, the accumulated deficits will force us to increasingly borrow from foreign nations, thus lessening domestic investment and reducing economic growth.

It is a dire future, but it is realistic one for young adults unless something is done to solve the problem. The problem begins and ends with the government’s spending habits. As Elmendorf explains, “almost all of the projected growth in federal spending…stems from the three largest entitlement programs – Medicare, Medicaid, and Social Security.”

Solving the nation’s budget crisis requires reforming these entitlement programs. Left unchecked the cost of Medicare and Medicaid alone will double as a percentage of GDP in the next 25 years. By 2080, when young adults enter retirement age, the government would be spending as much on these two health care programs as it currently spends on all of its programs and services.

Social Security is also standing on shaky financial ground. For the first time in its history the program will pay out more in benefits than it will receive in payroll taxes.This is six years sooner than even the CBO’s most optimistic prediction. Social Security is projected to run deficits for the foreseeable future and will have used up its $2.5 trillion surplus by 2037.

Given these humbling assessments one would expect the government to focus on reform. Instead, the Obama administration added another entitlement to the mix in the form of government run health care. Stripping the reform bill of its balance sheet gimmicks reveals that the bill will cost $2.3 trillion in its first ten years. Like all government programs, that cost estimate should only be expected to go up.

Together this creates an unsustainable future for young adults.Without significant change we will be paying a lifetimes worth of higher taxes only to see reduced benefits. As then-Senator Barack Obama said in 2006, “Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership.”

He remains right on both counts. If young adults have learned anything it is that we must not rely on an out of touch Washington to realize how they are damaging our future. If our nation is to keep its promise of opportunity for future generations, we must change course quickly The time must be now, and the people must be us.