It’s so tempting to ignore the national debt. After all, it’s been around a long time and so far nothing catastrophic has happened, right?
However, the debt is already the highest it’s been as a share of the economy other than just after World War II and is on course to keep growing indefinitely. That will cause serious problems down the road that will affect all Americans.
Here are a few reasons why ignoring the debt is a very bad idea.
Critical investments in the future will be crowded out. As the debt rises, so will the interest payments needed to cover it. Higher interest payments will squeeze investments that can improve the standard of living for future generations. In 2016, interest on the debt was $241 billion, which was more than the Departments of Education, Labor, Housing and Urban Development, and Transportation combined. Our kids are growing up with an uncertain financial foundation, without the confidence that they will be better off than those before them. Will we burden generations to come with our irresponsibility or will we finance a brighter future for them?
A high debt will hurt the economy and wages. The higher the national debt climbs, the higher the risk to the economy. The nonpartisan Congressional Budget Office (CBO) predicts that the economy will grow more slowly down the road with rising debt compared to debt that is declining. That will result in lower wages for American workers. Getting the debt under control responsibly is critical to any plan to grow the economy and increase income. We can’t keep the economy afloat if we’re drowning in debt.
Families will have a harder time rising up the economic ladder. Rising debt will cause interest rates to increase. This will make home, auto, college, and credit card loans more expensive, which will make it more difficult for families to improve their situation. For example, a typical family with a $300,000 mortgage can expect to pay at least $45,000 more over the course of the mortgage with the debt growing instead of shrinking. If we bring the debt down, we make it easier for families to rise up.
The country will be in a weaker position to respond to crises. We’d like to think that emergencies won’t occur, but they do. Rising debt will make it more expensive to borrow to respond to an unforeseen event. CBO warns that it would be harder to respond to a crisis like the last recession or an unforeseen war with debt at current levels or higher. We are weakening our ability to respond to future problems because we can’t make the tough decisions today.
Retirement will be less secure. The Social Security trust funds are forecast to be exhausted by 2034. At that point, all recipients will see a 23% reduction in benefits. Medicare also faces a funding shortfall. A comprehensive approach to fixing the debt must include making these vital programs sustainable over the long-term. And the longer we wait, the more drastic the changes will have to be. We should start securing Social Security and Medicare today.
The debt problem won’t go away by itself. It will take thoughtful action. Starting to address the debt now will help put the country on the right track to a better future.