Our nation has a looming fiscal crisis on its hands and millennials are now its biggest inheritor. With our national debt fast approaching $20 trillion—which is larger than the economies of China, Japan, and Germany combined—addressing and fixing the issue of the national debt should be a priority. Yet, millennials lack fundamental knowledge about the national debt.
A survey I conducted of American University students revealed that millennials are unaware of basic information about the national debt and do not see fixing the issue as timely or important.
Only 55 percent of the 370 students surveyed knew that the national debt ranged somewhere between $15 and $25 trillion. Additionally, 25 percent actually thought that the debt was higher than $25 trillion.
While a majority—although a slim majority—of millennials did in fact know how much the national debt was, most were unaware of what contributes to our large and mounting debt. Nearly 63 percent of millennials thought that defense contributes the most to the national debt whereas, only 12.3 percent said healthcare spending, 11 percent said net interest on the debt, and 9.9 percent said Social Security.
There is a clear lack of knowledge about what contributes to the national debt among millennials, which could prove rather dangerous considering their share in voting decisions. Millennials make up 31 percent of the voting population, which is the same size share that baby boomers hold. Additionally, millennials are now America’s largest population, surpassing baby boomers. With Social Security becoming insolvent in only 18 years and healthcare costs continually rising, these are issues that are timely and need to be fixed in a timely manner. Yet, the lack of knowledge amongst millennials is dangerous for making informed decisions about our nation’s crises.
The danger surrounding millennial’s lack of knowledge extends to how serious they see this as an issue that needs to be fixed. On a scale of 1-10, with 1 being “not very much” and 10 being “it should be a top priority for Congress”, the average millennial responded 6 on the survey, a clear indication that they do not see the timeliness and gravity of our national debt crisis.
However, this is an issue that needs to be addressed now before it has a devastating impact. Not addressing the national debt can greatly affect the economic opportunity and success of our nation. Millennials are only at the beginning of their careers. Here are 6 reasons why they should care:
- Economic Growth: Rising debt slows economic growth as it reduces investment in the economy. CBO projectsthat the economy will be 5 percent smaller by 2046 because of the rising debt.
- Lower Interest Rates: A growing national debt can hike interest rates, which results in higher payments on car loans, mortgages, or student debt for Americans. The CRFB calculatedthat if the debt were at 65 percent of GDP as opposed to the current 77 percent, interest rates would be two-thirds of a point lower.
- Higher Wages and Income: Gross national product per capita will be about $4,000 lower by 2046 because of the debt. This means that each person will see about a $4,000 drop in their income. However, if the budget is balanced, gross national product would increase by more than 6 percent in 2040, resulting in a $5,000 increase in income per person in today’s dollars. On average workers would see an increase in income of $45,000 over the next 25 years.
- Less Risk of a Financial Crisis and Better Response to Crises: With our debt so high, the government is not able to respond as well to unexpected crises because the federal debt is such a large percentage of the economy. Additionally, the continual rise of debt as a share of the economy is extremely troublesome for consumer confidence. As investors would start to question whether the government had the ability to pay back its liabilities on borrowed funds, investors would demand higher interest rates. This sudden and sharp demand in interest rates would create a debt crisis. Higher interest rates is especially troublesome for millennials who have mounting student loan debt.
- Increase National Security: Nearly 60 percent of our debt is being held by foreign investors. Japan is the second largest holder of our national debt at 17.7 percent and China is the third largest at 16.8 percent. With our debt continuously growing, it is easy for shares of our debt to get larger which poses a potential threat. If one of these countries owns too much of the debt, they could try to exert an influence on our policy choices or place pressure on a certain decision. China, specifically, is a staunch economic competitor to the United States, which is worrisome if China were to use its holdings against the United States.
- Increased Investment Means More Money Spent Towards Programs That Matter: Increasing government debt leaves no room for spending in areas of investment. With mandatory spending steadily increasing, discretionary spending is being crowded out. Discretionary spending holds some of the most important programs, especially those that are beneficial to the well-being of children and low income minorities.
Natalie De Vincenzi is a student at American University and is an advocate of fiscal responsibility.