U.S. debt is reaching unprecedented levels, and a former White House economist, Todd Buchholz, has cautioned that the Treasury Department missed an opportunity to alleviate the burden on Generation Z. Buchholz emphasized that Gen Z, already burdened with concerns such as high housing costs and the impact of social media on mental health, now faces the weight of irresponsible debt accumulation from previous generations.
Over the years, U.S. debt has steadily climbed, surpassing significant historical markers. Notably, gross federal debt relative to GDP has exceeded levels seen in the aftermath of World War II. The cost of servicing this debt is projected to surpass defense spending this year, raising alarms from figures like Fed Chairman Jerome Powell and various CEOs in the financial sector.
Buchholz highlighted the disproportionate impact on Generation Z, noting that half of young adults believe they may never afford a home while being tasked with footing the bill for previous generations’ fiscal recklessness.
Todd Buchholz (Credits: Speaking)
He argued that the Treasury Department could have capitalized on historically low interest rates post-financial crisis by issuing longer-term bonds, locking in lower borrowing costs. However, the department largely stuck to short-term borrowing, resulting in higher costs as debt matures and is rolled over.
Despite missed opportunities, Buchholz suggested that future chances to secure cheaper debt may arise, urging the Treasury Department to consider issuing long-term bonds when inflation-adjusted yields drop below historical averages. However, this strategy alone won’t address the underlying issue of massive federal deficits driving the surge in U.S. debt.
Buchholz pointed to excessive government spending as the root of the budget problem, echoing President Ronald Reagan’s analogy of government resembling a baby with a voracious appetite and little accountability. The article concludes with a recommendation to subscribe to the CFO Daily newsletter for ongoing insights into corporate finance trends and developments.
