WE all know about living off credit cards. Each Christmas, many of us charge up our cards, buying gifts for friends and family. We also know the bills had better be paid before we start running up the balance again. The longer we take to pay, the more we pay. Rather than being able to buy more products, more of our income is devoted to paying interest on that stereo we've already bought.
The federal government plays a similar game, with one big difference: No one ever sets a credit limit or confiscates its credit cards. Every day is Christmas in Washington. But if we don't begin to balance the budget, someone is going to lose their government credit card sooner or later, and that someone is those of us under 30. The time has come for the government to balance its budget - to stop giving away our future.
Each year the government spends more than it takes in. These annual deficits add up over time to form the federal debt. The government pays the interest on the debt but never pays off the principal. This is equivalent to making the minimum payment every month on a credit card. The result is a national debt topping $4.9 trillion. If the government was forced to make good on the entire debt right now, all of us would already owe $18,000 each. A child born today can expect to contribute $187,000 in tax dollars to pay interest on the debt.
The average American pays $800 a year in taxes just to service this interest. But because we continue to run deficits, the $800 contribution fails to stop the debt from climbing. Each year we pay more taxes as the debt continues to grow. We - America's younger generations - will receive fewer services in return.
Current interest payments on the debt total as much as defense spending. If we let the debt grow even more, these two essential areas, both of which must be funded, will consume our entire budget. We'll have no choice but to abolish all other services or significantly raise taxes.
Who pays the debt?
I'm 23 years old. Washington politicians argue whether or not to balance the budget in seven years. Yet in seven years, I'll only be 30 - with another 30 to 40 years left working. If tax brackets start increasing to pay off this debt, the change will directly affect me and everyone else my age. The battle over the balanced budget is a battle we have to fight.
The real reason for the deficit is entitlements - primarily Social Security and Medicare - representing large sums of money transferred from the youngest generations to the oldest. Most of our taxes pay for services given away to older people.
Consider Medicare. A young couple making $25,000 a year pays almost $2,500 a year in payroll taxes - including taxes that fund Medicare. Many are unable to provide health insurance for their families. Yet an over-65 couple with an income of $1 million a year is entitled to unlimited Medicare health care benefits - much of which we pay for.
At their current pace, Medicare and Social Security will go bankrupt long before we ever become senior citizens. In fact, the so-called Social Security "trust fund" is actually an IOU. The government hasn't "saved" the money in any way - it has simply promised to pay, with money from those just now being born.
If we balance the budget now, however, our generation will begin to see many of the advantages our parents had. Most notably, a balanced budget will mean less government borrowing to pay interest on the debt each year. The result will be less competition for borrowing, lowering interest rates by 1 to 2 percentage points.
In terms that matter to us, this means: A four-year loan on a $15,000 car will be $676 less expensive; payments on a 30-year, $80,000 mortgage will be $107 less every month, or $43,520 less over the life of the mortgage; students at a four-year college can save $8,885 on a 10-year loan.
The lower interest rates resulting from a balanced budget also are expected to help businesses expand, creating 4.25 million new jobs over the next 10 years and boosting per capita income more than 16 percent.
A better inheritance
Such would be the type of world our parents and grandparents grew up in: good jobs for hardworking people; affordable houses, cars, and student loans.
Our grandparents won World War II; our parents, the cold war. Older generations deserve our respect and devotion and deserve to take out of Social Security and Medicare what they've put in. But wealthy older Americans - with extensive savings, pensions, and outside health coverage - cannot continue to take more than they paid. A married worker retiring in 1995 will receive $182,000 more in Social Security checks than he or she contributed to the system. Younger generations cannot afford to pay for this much longer.