Note: This article is part of the ‘Principles Project,’ a list of principles, axioms, and beliefs that undergird a Christian view of economics, liberty, and virtue. Click here to read the introduction and other posts in this series.
The Principle: #21A – National debt is almost always an unjust form of an intergenerational wealth transfer.
National Debt — The federal or national debt is the net accumulation of the federal government’s annual budget deficits; the total amount of money that the U.S. federal government owes to its creditors. (Source)
Intergenerational Power — Present generations may be said to exercise power over (remote) future generations when, for example, they create conditions that make it costly for future generations to decide against continuing to pursue present generations’ projects. In this way, present generations effectively manipulate interests of future generations, and can successfully achieve the intended result of having their projects continued. Remote future generations cannot exercise such an influence on presently living people, and in this sense the power-relation between present generations and remote future generations is radically asymmetrical: remote future people do not even have the potential for exercising such power over presently living people. (Source)
Resources — Things of value we can use when we need them to accomplish an activity.
Wealth — Access to or control over an abundance of valuable resources.
Over the past decade there has a been an incessant focus on the so-called “student loan crisis.” Many college students take out loans to pay for their education only to discover that it affects their financial decisions later in life.
The average student leaves college with about $25,000 in student loan debt, which will leave them with a monthly payment of approximately $280 (assuming 6.8 percent interest and a 10-year repayment plan). The National Association of Colleges and Employers calculates that the preliminary average starting salary for graduates from the class of 2018 is about $50,004. This means that as soon as they leave college a student will begin paying seven percent of their salary to pay off their student debt.
Because their income will likely rise during this time, though, the percentage of the debt relative to their income will shrink. And if they make payments consistently they’ll be free of this debt within a decade of graduation. For many students, this is a worthwhile investment since the loan allows them to increase their lifetime earnings potential.
Now imagine those same students—and others who choose not to go to college—are told they have another loan they must pay. They don’t really know what the loan was for or even if it benefitted them at all. But they will nevertheless be required to pay about seven percent of their income toward this loan for the rest of their lives.
This is not a hypothetical situation; it’s the reality for almost all Americans. Yet while we constantly hear about how student loans are affecting graduates—causing them to delay such activities as marriage and home buying—we don’t hear much about how this other debt is a drain on individuals and society.
The debt to which I’m referring is the national debt—or more specifically the interest on the national debt. We have no workable solution for paying off the national debt, which is currently over $22 trillion. Even if we spent every dollar of federal tax revenue on the debt ($3.4 trillion), it would more than six years to pay it off.
Unfortunately, the problem is not just the total debt but also the interest we have to pay to hold this debt. Last year the interest payments were $325 billion; in ten years they will be $928 billion—nearly a trillion dollars a year. By next year, the federal government will spend more on interest than on Medicaid or children. By 2024, we will be spending as much on interest as we do on defense spending. According to the Committee for a Responsible Federal Budget, net interest spending will grow faster than any other part of the budget and within thirty years will be the single largest government program.
As John Coleman has said, “Debt can often be seen, essentially, as a loan from future generations to the current generation.” We are taking money to pay for our current projects and sending future generations the bill—all without giving them a voice or vote in the matter.
What this means is that we (the present generation) are using our power to consume good and services today and have it paid for by future generations. The result is that those generations will have fewer resources to pursue their own projects, such as taking care of the poor and needy.
It’s easy to justify incurring debt in order to pay for projects we believe are necessary, such as expanding our current social safety net. We may even justify deficit spending on projects that will have a undeniable positive effect in the future (such as moving from coal to nuclear energy). But is it fair to reduce the ability of future generations to pay for their projects so that they can pay for ours?
We should consider it to be not only unfair but outright immoral to transfer exorbitant amounts of wealth from future generations to those of us who are living today. Our crippling national debt, and our continuously adding to it every year, is thus a form of intergenerational injustice. We can’t do much about the injustice that was thrust upon us by prior generations. But we can and should work to break the cycle of exercising unjust power over our descendants.
Image source: Wikimedia