With America’s debt projected to reach astronomical levels over the next decade, it’s up to my generation to take responsibility and overcome our chronic spending habits. Recent projections by the Congressional Budget Office (CBO) predict that total deficit spending will reach $2.6 trillion, or 116% of GDP, by 2034. But as Mark J. Warshawski of the American Enterprise Institute points out, these projections are likely a gross underestimate.
In fact, Warshawski suggests that making some adjustments to the model (such as adding realistic deficit growth and real interest rate figures) could see the debt-to-GDP ratio rise to 138% by 2034. While the US dollar remains strong despite the fiscal challenges, good fortune is not guaranteed, and continuing on the current fiscal path will bring the economy and society to a cliff beyond which it cannot reverse course.
Here’s the crux of my argument: My generation (Gen Z, ages 12-27) is not prepared to face the looming financial crisis. My generation is buried under student loan debt. We’re taking on mountains of personal debt, opening new lines of credit, and avoiding financial responsibility. To make matters worse, Gen Z is turning to gambling in hopes of getting rich quick. Sports betting, options trading, and other risky activities have become the new normal for young people who are fed up with inflation, soaring housing costs, and a government that believes the old rules don’t apply to them.
The new trend represents a growing dissatisfaction my generation has with the economic outlook. For decades, personal finance expert Dave Ramsey has preached financial prudence and extolled the virtues of saving and frugality. But this message doesn’t resonate with Gen Z, who frequently criticize Ramsey’s “outdated” advice: Why save and invest now when a realistic chance at homeownership is 20 or even 30 years away? Why minimize household spending if inflation will eat into your wallet? Advice that once guided previous generations to make prudent financial decisions has now morphed into corny memes that my generation barely takes seriously.
In response to Ramsay’s frequent advice to young people to cut back on spending, one TikTok streamer told The Wall Street Journal, “Sorry, but I’m not going to do anything to pay off my debt. I’m not going to eat rice and beans every day.” Other young critics of Ramsay point to his insensitivity to young people with tight personal finances. While some of this criticism is understandable, the flurry of backlash against “baby boomer” financial advice suggests that younger Americans aren’t ready to pay off the national debt when we can’t fix our own finances.
Despite record-high wages and a stable job market, Gen Z feels like the American Dream is more unattainable than ever before, primarily because of the cost of living: According to Bureau of Labor Statistics data analyzed by The Washington Post, Gen Z Americans pay 31% more for housing and 46% more for health insurance than Millennials (ages 28-43) did just a decade ago.
Of course, when examining data gauging American satisfaction, we need to look at both sides of the coin. For example, Gallup polling data shows that roughly 30 percent of American adults believe the American Dream is unattainable, but 70 percent believe it’s within reach. We can celebrate the incredible progress of economic development while also addressing the anxiety young Americans feel when the fruits of that progress seem far away.
But sympathy alone can only go so far. My generation must take action, even if it means following “outdated” financial advice that demands self-restraint. One might argue that because the financial crisis America now faces was brought about by previous generations, deeper personal debt does not materially change the likelihood of the nation’s fiscal collapse. But I believe our dire debt history suggests just the opposite: my generation has a responsibility to act prudently because the stakes are so high, and because we are the generation that will be called upon to fix our shaky economy, when the time comes.
America’s unsustainable budget deficits not only mean future economic disaster, but also slow current economic growth. One paper found that 36 of 40 studies found an overwhelmingly negative relationship between high debt and economic growth, as economic theory predicts. This means that not only are Gen Z Americans ill-prepared to reform the nation’s spending programs and restore the nation’s fiscal health, they are engaging in very actions that undermine their ability to achieve the American Dream. By embracing financial nihilism, they are thwarting any real chance of solving the problems they claim to be protesting against.
The fiscal cliff is approaching faster than expected. Our generation must first fix our finances before we can steer the country toward fiscal solvency. The health of our nation, and our lives, depend on it.
Michael N. Peterson
Michael is a content specialist at an academic institution in the Washington DC area.
He is currently completing his Master’s in Economics at GMU. Michael’s research focuses on development economics and institutional analysis.
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