The Impact of Government Debt on American Citizens

It's no secret: debt in the United States has and is skyrocketing. At the highest level since after World War II, national, state and local debt exceeds the size of the total economy. Unlike post-World War II, however, the federal debt will, in 2011 and beyond, soar. In the 1940s, debt reached 122 percent of gross domestic product (GDP), but by the time Dwight Eisenhower was elected president, debt was about three-fourths of GDP.

As many economists will argue, the key to minimizing local, state, and federal debt is fast economic growth. In the six years between debt being 122 percent of GDP and three-fourths of GDP, the economy grew 57 percent due to a pent-up demand for consumer goods, a young workforce, and high personal savings rates, among other things. In 2011, the opposite is causing a lack of rapid growth. Most households aren't in need of many things due to the 90s and early 2000s rise of cheap labor and goods, the workforce is aging, and personal debt is high with no end in sight.

Another difference between 2011 and the 1940s is that local and municipal governments are facing huge budget shortfalls.

A huge concern is the debt held by the Social Security Trust Fund. As the population ages and the workforce average age is younger (and the generations decline in size), Generations X and Y will struggle to provide for the much larger Baby Boomer Generation.

So what kind of impact does skyrocketing debt have on the average American? The answer may largely depend on the age of the person. Older Americans will likely have problems cashing in on pensions or Social Security as they age. In addition, due to healthcare reform, Medicare and Medicaid will likely be impacted.

As Baby Boomers age, they'll have similar, but more pronounced problems, with everything that their parents and older friends are struggling with now. With some Baby Boomers at retirement age, companies are likely providing retirement packages that will supplement government assistance, but it will not be enough for most Boomers.

Generation X is largely in the driver's seat, which means that they are under the most pressure to perform. Today's executives and business owners, they bear the burden to provide for their parents and grandparents. Generation Y is closely behind Gen X in feeling the pressure to ensure the public coffers are full.

With unemployment at one of the highest points in recent history, the future for America 's youngest citizens is very uncertain. A high national debt, questionable employment, uncertain healthcare, high personal/family debt, a very different international scene (outsourcing, cheap labor abroad), and a number of other problems will create problems that will likely last for years, if not decades, to come.

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Resources:

http://www.washingtonpost.com/wp-dyn/content/article/2011/02/20/AR2011022003201.html?hpid=topnews