"Meet the Generations" : Gen-Web
Keisha is part of our youngest generation. With most of her life still ahead of her, she has the most to gain from lawmakers acting now to control our deficits and debt -- and the most to lose if they fail to do so.
How would our leaders’ fiscal choices affect Keisha?
Fiscal Gridlock (Scenario One). If policymakers fail to take fiscal action (our “fiscal gridlock” scenario), she faces a lower standard of living over her lifetime. She will also face the fallout from a fiscal crisis at some point in her life, when our creditors finally react negatively to our mounting national debt.
As she approaches her teenage years, national debt-related pressures will dampen growth and investment as the economy tries to pick up steam. Her parents will have increasing trouble making ends meet as the job market weakens, so Keisha’s family will have less money to spend on the basics of everyday life -- not to mention any extras. If a fiscal crisis occurs during that time, our policymakers will be required to make hurried, blunt policy changes that may well slash critical funding for Keisha's education or other important programs such as maternal, infant, and childhood nutrition. With her fundamental well-being affected, Keisha will be not be able to succeed to her full potential.
Looking further ahead, as she grows older and tries to make a living on her own, she will find fewer job prospects in an economy weakened by debt pressures. Her income will be less than what she expects and perhaps even needs. Economic conditions will put her on a lower income growth path for the rest of her life. If decisions on Social Security's sustainability are delayed until the trust fund goes completely broke by 2040 (when Keisha is trying to support herself and a growing family), she may be hit with a huge tax increase to pay for the benefits of older citizens. If benefits are lowered, Keisha will likely have to provide supplemental income for her parents and work longer to save enough for her own retirement.
Adopt a Fiscal Recovery Plan (Scenario Two). In contrast, Keisha will be far better off over her lifetime if our leaders adopted a fiscal recovery package (described in our Scenario Two). Setting in motion a plan to stabilize and then reduce our debt obligations as a share of GDP over time will remove destructive pressures from the economy. The risk of a fiscal crisis (and its high costs for everyone) will also be diminished. As a result, higher growth, investment and wealth will mean increased living standards for Keisha and other members of Gen-Web. The longer she experiences these conditions, the better off she will be over her lifetime. If our Social Security challenges are addressed and managed well in advance, kids like Keisha (plus her parents) can plan more effectively and will not see their disposable income sharply and suddenly reduced in a trust fund crisis. Plus, creating fiscal space will allow policymakers to invest in programs that are known to boost underlying growth over the long-run (by targeting human capital, infrastructure, and research/innovation and development, for example).
By acting soon to improve our budget outlook, we can provide a brighter future for Keisha and other Gen-Web members. Fiscal gridlock has unacceptable consequences. The road ahead will be tough regardless of which fiscal path we take. But the medium- and long-term payoffs from fiscal consolidation will be considerable, particularly for our youngest generation -- and their children.