Chase Hagaman, New England regional director for The Concord Coalition, discusses the challenges facing millennials both with their personal finances and the nation's growing debt burden in an op-ed for Seacoast Sunday, the Sunday edition of the Portsmouth Herald in New Hampshire. The op-ed can also be found here.
For those of us in the millennial generation, the federal debt burden is both personal and unavoidable.
As more and more baby boomers retire, younger Americans are expected to help sustain entitlement programs and, eventually, help lower federal deficits to put the debt on a sustainable path.
At the same time, however, we millennials (I am 26) are trying to pay off our college loans, launch careers, build new homes and families. Oh, and we are told we should also start early in saving for retirement. This would be a challenging set of tasks in the best of circumstances. But for millennials — born after about 1980 — the status of our personal finances makes things even more difficult. A slow economy and weak job prospects have left many of us cash-strapped, debt-ridden and uncertain about our futures.
Many millennials postpone major life events, like having children and buying a house, or fail to qualify for an auto loan because of personal debt. According to a study by the Pew Research Center, more than a third of the millennials still live with their parents.
Those who find work often enter industries with depressed salaries. Excluding taxes, the median income for the 25 to 34 age bracket was $30,500 in 2012. Adjusting for inflation, we are paid less than our counterparts in 1974.
Student loan debt has become the largest consumer debt aside from mortgages, affecting more than 25 million individuals under age 40. Millennials carry nearly two-thirds of the approximately $1 trillion in total student loan debt. As a result of all these factors, many younger Americans save very little and rely too heavily on credit cards just to cover daily expenses.
As for the longer term, retirement can seem unattainable.
The nation's financial difficulties appear to compound our own. Although the federal deficit has dropped in the last two years, it is expected to soon begin rising again on an unsustainable path. Washington has failed to close the huge gap between spending and tax revenue. Interest payments, Medicare, Medicaid and Social Security already consume more than half of the federal budget, and they are expected to grow rapidly in the coming decade. Moreover, the nation's inefficient tax code results in more than $1 trillion in lost revenue each year.
So the government keeps adding to its debt, now totaling $17.4 trillion, simply to sustain the status quo. If we do nothing, the pressure on our wallets will only increase with time. The country's deteriorating finances will limit our ability to address our priorities, plan for the future and avoid another financial crisis.
That is why millennials must take a proactive approach. That begins at home. We must set personal spending priorities, focus on paying off college loans and other debt quickly to avoid mounting interest costs, and look for ways to accrue savings. And as daunting as it may seem, we can also help get the nation on the right financial track. We must become more knowledgeable and involved in sending responsible elected officials to Washington and encouraging them to make the difficult decisions that are needed.
Hard choices now can help bring long-term fiscal stability, strengthening the economy and preserving America's position of global leadership.
Together, acting with the future in mind, we can make a difference. We millennials must hold elected officials accountable, bring Washington's focus back to comprehensive budget reform, promote bipartisan solutions and join those in the generations ahead of us who are advocating for greater fiscal responsibility.