As Democrats and Republicans bargain over how to address the “fiscal cliff,” young people stand to lose a lot more in the outcome than just a negligible decrease in student loan interest rates and the right to stay on their parents’ health insurance well into their adulthood (both staples of President Obama’s 2012 campaign appeal to college students and recent graduates).
Despite the fact that young people overwhelmingly supported President Obama in 2012, most were probably unaware that they did so against their own long-term self-interest.
Here are three reasons young Americans should be watching the fiscal debate closely:
1. Failure to Reform Entitlement Programs Disproportionately Hurts Younger Americans
Although more than half of federal spending in 2012 will go to supporting entitlement programs, Democrats have effectively taken Social Security reform entirely off the table in the fiscal cliff debate. (They claim they will take up the issue at an unspecified time in the future. Yeah, right.)
The 2012 annual report of the Social Security Board of Trustees revealed that under current conditions, the Social Security Trust Fund will be exhausted in 2033, at which time expected revenues will only be able to fund about 75 percent of scheduled payments.
That means if you’re 18-29 years old today (and retiring between 2049 and 2060), you will pay hundreds of thousands of dollars in Social Security taxes over the course of your lifetime and receive less than your contribution in benefits – a negative return on investment! You’re better of taking your chances in the stock market.
On the other hand, current retirees and baby boomers will receive full benefits paid for by current workers, aka you. Forget shifting wealth from rich to poor; our entitlement programs are really no more than a massive redistribution of wealth from young to old.
2. Young Americans Will Be Stuck With the Current National Debt
The President has cleverly shaped the entire deficit debate in terms of raising taxes on the “wealthy,” despite the fact that repealing the Bush tax cuts for top-earners is only expected to raise about $80 billion in 2013 against a current annual deficit of more than $1 trillion.
In order to eventually pay-off the $16.3 trillion national debt while also maintaining spending at levels President Obama and other liberals prefer, taxes will ultimately need to be raised much higher on everyone, not just the reviled “1%.”
Howard Dean admitted this well-concealed fact on MSNBC this week. The non-partisan Government Accountability Office also stated it bluntly in a report released this week: “the federal government is on an unsustainable long-term fiscal path.”
Either federal spending needs to be reduced dramatically or younger Americans of all income levels will ultimately be stuck with the higher taxes necessary to pay down the debt.
Most people would be angry at their parents if they left them with $50,000 in debt to selfishly pay for their own lavish lifestyle, so it’s a wonder that more people don’t get upset with the Federal government for doing the same thing.
3. The Youth Unemployment Rate is 50 Percent Higher Than The Overall Unemployment Rate
Youth unemployment (ages 18-29) is currently around 12 percent, while overall unemployment is around 8 percent. The President has yet to explain how repealing the Bush tax cuts for the wealthy will help the economy or create jobs for young Americans.
To the contrary, in 2009 Obama suggested (correctly) that raising taxes on anyone during a weak economy was bad economic policy. Britain’s 2010 tax hike on the wealthy also demonstrated the tendency of higher top-marginal tax rates to slow economic growth and hurt job creation.
If the economy faces another downturn, younger, inexperienced workers will be the first to be laid-off, and jobs will be even harder to come by for recent graduates.
Young Americans have more to lose in the outcome of the fiscal cliff debate than just about any other group.