With a government shutdown upon us, the two words on everyone’s lips are federal budget. The government’s debt is something that neither party has been able to agree on, which makes a piece of legislation like the Intergenerational Financial Obligations Reform (INFORM) Act not only important, but timely.
According to the INFORM Act website, the bill calls for the Congressional Budget Office, the General Accountability Office (GAO), and the Office of Management and Budget (OMB) to perform fiscal gap accounting and generational accounting for proposed legislation. The INFORM ACT provides budget transparency not for its own sake, but to raise the difficult questions that need to be answered for the sake of our long-term fiscal solvency; in particular, how does a policy increase or decrease the tax burden on young people?
Had such questions been asked before the start of the Iraq War or during the debates on Obamacare, they might not have passed as easily, if at all. LA Times columnist Hiltzik unleashed damning criticism of the INFORM Act in his column on September 17th, stating that generational accounting doesn’t distinguish between spending and investment: “The government’s decision in the 1950s to spend billions to create the interstate highway system shows up in generational accounts as a huge burden on post-1950s taxpayers,” he wrote. “But we’re obviously reaping economic benefits from that decision, as will our children and grandchildren.”
Laurence Kotlikoff responded eloquently at Forbes: “The objective is to understand which generations will pay for those public goods and other government spending … Yet we can’t make those decisions until we understand who will likely pay for them.”
Despite the intense debate, the INFORM Act, if passed, will provide invaluable insight to the fiscal consequences of government spending. Instead of using the comfortable ten-year projection as a measuring stick for long-term viability, gap and generational accounting will help lawmakers understand how government expenditures will affect current and subsequent generations.
Not only is the INFORM Act a bipartisan initiative that was introduced and sponsored by Democratic and Republican senators, showing both sides of the aisle are on board, an all-star team of economists has given it their seal of approval. Fourteen Nobel laureates in economics have endorsed it thus far, and over a thousand other economists from around the world.
That kind of overwhelming consensus indicates the INFORM Act is a based less on sound economic theory than simple common sense: you have to count the money you have spent along with the money you haven’t. Doing so allows you to know not only how much money you are actually spending, but also who is spending it, and what obligations current programs place on the future. While the INFORM Act cannot predict who shoulders what publicly funded project with complete accuracy, more information is better. Simply put, generational accounting is more thorough and transparent.
Student debt is crushing millennials and preventing them from reaching the financial milestones of adulthood, and in addition, the current structure of Social Security and Medicaid benefits the baby boomer generation, putting them in the unique position of being more financially secure than their parents and their children. The INFORM Act helps us come to terms with this uncomfortable reality.
Hitzkin may have crafted a smart-sounding argument, but the facts remain: student debt totals over $1 trillion, exceeding consumer debt, and the average college graduate is saddled with $26,000 in student loans. Earlier this year The Can Kicks Back, a non-partisan millennial organization dedicated to advocating for viable debt solutions, endorsed the INFORM Act after it was introduced by Senators Thune and Kaine, the former a Republican, the latter, a former DNC chair.
Bills like the INFORM Act should be an easy sell in Congress — they’re about transparency and coming to terms with budgetary realities rather than creating solutions themselves. But for so long the government has hid its full slate of obligations with accounting tricks that it would rather keep under the rader. The INFORM Act is a necessary piece of legislation designed to prevent the debt yoke burdening millennials from happening again. This bill needs to pass for the sake of millennials’ future and for the generations that come after them.