I Am Worried about the Government Debt My Descendants Will Inherit
This is a common concern I hear from seniors and even some enlightened baby boomers. (Yes, Virginia, there actually are some enlightened baby boomers!) Is this a legitimate concern? You betcha. The chart below shows actual per-capita gross federal debt through 2009 and the non-partisan Congressional Budget Office's (CBO) projected per-capita federal debt thereafter through 2020. In 2009, each of us was responsible for $38, 651 dollars of gross federal debt. By 2020, CBO projects each of us will be on the hook for $62, 808 of gross federal debt.
Chart 1
How can this concern be alleviated? Well, short of bringing about a change in our federal government entitlement programs - Social Security and Medicare - about the only thing parents and grandparents can do to alleviate the huge indebtedness we collectively are passing on to our descendants is increase the inheritance we leave them - i.e., increase our current saving rate. So, cut back on the early-bird specials at your favorite beanery and play one less round of golf a week. Rather, use part of your monthly Social Security check, which is partially responsible for the debt you are passing on to future generations, to fund a trust account for your grandchild. Feeling a little achy in the morning? Don't rush to the doctor, which will speed the depletion of the Medicare Trust Fund. By not using Medicare as much, you can keep that Medicare Trust Fund topped up and, in effect, not pass on as much debt to your descendants as otherwise. In the immortal words of Pogo, "We have met the enemy and he is us!"
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Author: Paul Kasriel
Paul L. Kasriel
Director of Economic Research
The Northern Trust Company
Economic Research Department
Positive Economic Commentary
"The economics of what is, rather than what you might like it to be."
50 South LaSalle Street, Chicago, Illinois 60675
Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005. The accuracy of Paul's 2008 economic forecast was ranked in the top five of The Wall Street Journal survey panel of economists. In January 2009, The Wall Street Journal and Forbes cited Paul as one of the few who identified early on the formation of the housing bubble and foresaw the economic and financial market havoc that would ensue after the bubble inevitably burst. Through written commentaries containing his straightforward and often nonconsensus analysis of economic and financial market issues, Paul has developed a loyal following in the financial community. The Northern's economic website was listed as one of the top ten most interesting by The Wall Street Journal. Paul is the co-author of a book entitled Seven Indicators That Move Markets.
Paul began his career as a research economist at the Federal Reserve Bank of Chicago. He has taught courses in finance at the DePaul University Kellstadt Graduate School of Business and at the Northwestern University Kellogg Graduate School of Management. Paul serves on the Economic Advisory Committee of the American Bankers Association.
The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The information herein is based on sources which The Northern Trust Company believes to be reliable, but we cannot warrant its accuracy or completeness. Such information is subject to change and is not intended to influence your investment decisions.
Copyright © 2005-2012 The Northern Trust Company
Author: Asha Bangalore
Asha Bangalore
Vice President and Economist
The Northern Trust Company
Economic Research Department
Positive Economic Commentary
"The economics of what is, rather than what you might like it to be."
50 South LaSalle Street, Chicago, Illinois 60675
Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago. Ms. Bangalore was a faculty member of the Department of Economics, Trinity College, Connecticut, during 1990-1992. She was graduated with a Bachelor of Arts degree from Bangalore University, India. She received Master of Arts and Ph.D degrees in Economics from the University of Connecticut. Ms. Bangalore is a member of the National Association of Business Economists and the American Economic Association.
The information herein is based on sources which The Northern Trust Company believes to be reliable, but we cannot warrant its accuracy or completeness. Such information is subject to change and is not intended to influence your investment decisions.
Copyright © 2009-2012 The Northern Trust Company
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