The hidden cost of US debt: Why younger generations should be outraged

Simone Del Rosario: The U.S. is so far in debt, the interest payment alone is now costing more than $1 trillion a year, Bloomberg revealed this week. Experts say the soaring debt is an alarm bell for the nation. But we spoke to an economist who has been ringing this bell for decades. 

Laurence Kotlikoff: I’m kind of outraged, morally outraged. 

Simone Del Rosario: And if you’re of a younger generation, you may be too after listening to this interview. Laurence Kotlikoff is a bestselling author and economics professor at Boston University. He even ran for president on the basis that existing politicians won’t do what it takes to save our economic future.

Laurence Kotlikoff: We need people who know what they’re doing. We need engineers to build a bridge over the Chesapeake. We have buffoons, you know, basically in Congress.

Simone Del Rosario: Kotlikoff is known in economic circles as a pioneer behind generational accounting. That’s where you look at the sustainability of fiscal policies, like Social Security, and the financial burden it places on different generations. 

Laurence Kotlikoff: A lot of economists have jumped on, have used a model for the last really 25 years, 30 years, that has this assumption that people actually care about their kids, to the point where if they know their kids are going to be in trouble, they save for them. It’s not the case, our older people don’t give a damn about, as a group, they don’t give a damn, and I could use stronger language, about you, folks. It’s all take as you go. You give and we take.

Simone Del Rosario: There’s this profound moment from President Biden’s State of the Union address…

President Joe Biden: So, tonight, let’s all agree — and we apparently are — let’s stand up for seniors. (Applause) Stand up and show them we will not cut Social Security. We will not cut Medicare.

Simone Del Rosario: Now, I’m not advocating for pulling out the rug from under this entire group of people. But this protect-seniors-at-all-cost scenario that we live in, what is that going to cost the next generations?

Laurence Kotlikoff: You know, he’s said that, unfortunately, because maybe he wasn’t too aware of the facts. The reality is that we’re taking from the young, expropriating the young, giving to the old, through so many channels, not just social security, we’re having tax cuts that are primarily aimed to help the older people, because when the taxes are raised in the future, they’re not paying for themselves. We won’t be around, we’ll get to spend more, you guys will be around. We’re changing the tax structure, just shifted more towards taxing younger people who have labor incomeand reducing the taxes on asset income, capital gains breaks and dividend tax breaks. We are expanding Medicare and Medicaid, Medicaid, most of Medicaid, you know, which is health care for the elderly, 70% of those dollars go to the elderly or nursing homes. So through all the expansion of these programs and changes in them, we have expropriating younger people every way possible. And does this mean I don’t like older people, you know, some of my best friends are older. We obviously shouldn’t be pulling the rug out from any, under any poor older people, and even lower middle class older people, but to not recognize that we have a massive imbalance that we’re kind of Argentina in the making. Argentina, in 1920, had 85% of our per capita GDP, they were almost as rich as we are. Today, they have 14%. It’s all due to running these policies over a century. So this is a slow review, a slow train wreck, you ask the question, when exactly will things hit the fan? Did Argentina ever have a single crisis that put it down, you know, produce a great depression or led to  everybody to leave the country? No, it’s it’s been a series of many crises through the years. But it doesn’t mean there couldn’t be like a default on US debt, or a default on Social Security that, because we are really on a rapid clip, you know, a rapid pace over the cliff. 

Simone Del Rosario: You said that you are outraged. Are you surprised that younger generations aren’t more outraged and more outspoken about this system, about how much we’re going to be left holding the bag?

Laurence Kotlikoff: Well, I’m not all that surprised because nobody’s talking to them about this in these terms, right. Nobody’s saying that compared to me and my generation, your generation is going to have 50% higher taxes. We need some people that know what they’re talking about here and know the truth. But we have, you know, clowns, like Trump and President Biden is also taking Social Security off the table, right? So what’s all that about? Does he really understand what he’s doing here? I think he would get more votes if he were educated about the problem and then he actually came out and said, this has to be fixed. People would respect him. They say this guy is old enough to know, to tell the truth. As opposed to this guy is old enough to know that how the game is played. We don’t need to get to play the game again, the game we’re playing is suicide, economic suicide.

Simone Del Rosario: If politicians were to come forward, pragmatically, and say, ‘We need to come together and solve this problem. We are in a lot of debt and we can’t fund the promises that we made to the American people,’ they would get eviscerated, right? 

Laurence Kotlikoff: You have to appeal to what may not really exist, which is altruism. You have to say to older generations, look, I’m actually looking out for your kids, I want you to look out for your kids, I want you to vote for me, I want you to take a sacrifice. We’re in this together. These are all our kids. And they’re going to be working together in teams. And we want them to be able to survive, we want the country to survive. We have enough crazies out there trying to kill freedom, democracy, and we need to be strong. And this is our future. So we were able to get people together when it was World War Two, when we were attacked, well, we’re being attacked by politicians. And so somebody needs to stand up and say, the enemy is actually in the halls of Congress, they’re other ones who are putting our kids at risk, and vote with me, not with them. I don’t know maybe that pitch won’t work. But it’s better to go down losing telling the truth than winning telling a lie and making your life an economic disaster.