This generation’s lack of fiscal responsibility will burden millennials and Gen Zers.

This generation's lack of fiscal responsibility will burden millennials and Gen Zers.

The Urgent Need to Take Fiscal Responsibility Seriously: A Lesson from Australia’s Intergenerational Report

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In the world of legislative and political debates, there is a tendency to overlook the long-term consequences of rapidly rising debt resulting from spending and tax cuts. Tough decisions on putting our nation’s finances and key federal programs on a fiscally sustainable footing over future decades are often avoided, effectively shifting the burden to future generations. This lack of fiscal responsibility has significant implications for our government, society, and individual lives.

One country that has taken a different approach is Australia. Every five years, Australia publishes an Intergenerational Report that projects future trends and implications in various areas including demographic, environmental, technological, economic, and budgetary policy. This report serves as a guide to the future fiscal implications of current policies, encouraging the electorate and government to consider how their decisions will impact future generations and the country’s ability to address future challenges.

One of the major focuses of Australia’s Intergenerational Report has been the rising number of older citizens and the resulting increase in the cost of pensions, retirement funds, and healthcare programs. By highlighting these future consequences, the report aims to ensure that those in government and the nation’s voters take them into account when making legislative or voting decisions.

In the United States, there has been a historical acknowledgement of the need to address high levels of debt incurred during wartime. After the country’s leaders recognized that such debts were unsustainable, they took measures to reduce the government’s debt in the post-war years. These measures included cuts in military spending, restraint in domestic spending, and prioritizing financial resources. The result was a significant decrease in the nation’s debt after the War of 1812, the Civil War, and both World Wars.

However, in recent decades, fiscal responsibility has not been a significant political objective for many candidates, officials, or voters. Large sums of money have been allocated to programs primarily driven by political attractiveness, rather than serving broad national interests. Government spending has increased, and tax cuts have been politically motivated, with little consideration for the long-term impact on the deficit and debt.

The consequences of ignoring the accumulation of massive debt are dire. In the next decade, federal debt is projected to reach 115% of GDP, with interest costs totaling $10 trillion. Interest payments alone will exceed defense and Medicaid costs combined. This escalating debt will result in higher interest rates, making borrowing and financing more expensive. It will also crowd out spending on vital national programs, hinder economic growth, and create challenges for funding future emergencies and national priorities.

Addressing this issue requires a shift in mindset and the recognition that tough remedial measures are necessary. Politicians should commit to ensuring that any spending increases or tax cuts they support are aimed at achieving important national priorities and are offset by tax increases or spending cuts in other areas. Vague promises and the belief that economic growth alone can resolve budget deficits and debt must be called out for what they are – strategies to avoid the problem and undermine the credibility of our political system.

Moreover, finding solutions to the fiscal challenges requires compromise and bipartisanship. Raising taxes or cutting spending programs alone cannot resolve the issue. A comprehensive approach is necessary.

To mobilize a consensus on addressing these fiscal prospects, political leaders must increase public understanding of the potential implications for individuals and the entire country. The average American finds it difficult to relate to massive aggregate sums, but they can connect with everyday issues such as interest rates, the cost of goods and services, and the reliability of social security benefits. By explaining the problem in terms that people can relate to, political leaders can work with constituencies that have a stake in the financial stability and solvency of the country and its key government programs.

Furthermore, it is crucial to recognize the generational component of this problem. Younger Americans may perceive the future impact of these fiscal challenges as distant, but failing to address them now will affect their ability to finance major life expenses and undermine the nation’s security and ability to address crises.

Taking lessons from Australia’s Intergenerational Report, the United States should consider implementing a similar framework to provide a clear view of the impact of current policies on future generations. By curbing political appetite for unnecessary spending and tax cuts, removing unaffordable measures, and engaging in an intergenerational discussion, the nation can begin to correct its ballooning deficit and debt.

Addressing fiscal responsibility is not an easy task, but it is crucial for the economic stability and wellbeing of current and future generations. It requires honest debate, tradeoffs, and sacrifices. As voters, we must demand accountability from our political leaders and support measures that prioritize the long-term financial health of our nation. The longer we delay, the greater the challenges become, and the harder it will be to find effective solutions.