By James Pethokoukis

The Congress Budget Office says the federal debt held by the public is “projected to equal 202 percent of gross domestic product in 2051, and the deficit is projected to equal 13 percent of GDP.” Unsettling Numbers. Now here’s an unsettling chart:

These are good top-line numbers to keep in mind if you’re concerned about how we are preparing the next generation of Americans to lead lives of opportunity and flourishing. “Yet many children in the United States do not have the resources or relationships they need to build a strong foundation for their future,” according to the recent consensus report of the AEI-Brookings Working Group on Childhood in the United States.

So if you accept both the statement from the report and the fiscal constraints suggested by that CBO chart, then you also accept the reality that Washington needs to make choices. And one obvious choice, then, is “rewriting the generational contract,” as the Working Group puts it. Here are a few stats from the report that make clear the nature of the current contract:

• In 2019, the share of the federal budget spent on children was 9.2 percent and the share spent on the adult portions of Social Security, Medicare, and Medicaid was 45 percent.

• Roughly 40 percent of the federal budget goes to Americans over the age of 65, mainly through Medicare, Social Security, and, to a lesser extent, Medicaid. Assuming no change in the benefit levels, these payments will make up more than half of the federal budget at some point in the next 10 years. Projected spending on Medicare and Social Security will increase from 7.9 percent of the nation’s total gross domestic product (GDP) today to 10.3 percent of GDP in 2029.

• Currently, a large share of Medicare and Social Security spending goes to well-off seniors. But older Americans are already in good financial shape by historical standards. Their average net worth has increased more than 50 percent since 1995.

• Using consumption and income data to assess changes in living standards, research shows that those 65 and older have much lower poverty rates than most other demographic groups and that these rates have fallen sharply over time.

So that’s the fiscal starting point for the proposed reworking of America’s generational contract. And how changes to that contract should proceed is the subject of the rest of the report, through which I intended to journey in coming blog posts.

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