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Former White House economist warns Generation Z of the dire consequences of the American debt blunder by previous generations

US debt is reaching unprecedented levels, and a former White House economist, Todd Buchholz, has warned that the Treasury Department has missed an opportunity to ease the burden on Generation Z. Buchholz emphasized that Generation Z, already burdened by concerns such as high housing costs and the impact of social media on mental health, is now facing the weight of previous generations’ irresponsible debt accumulation.

Over the years, U.S. debt has risen steadily, surpassing major historical indicators. Notably, gross federal debt to GDP has exceeded levels seen in the aftermath of World War II. The cost of servicing these debts is expected to exceed defense spending this year, raising alarms from figures like Fed Chairman Jerome Powell and several financial industry CEOs.

Highlighting the disproportionate impact on Generation Z, Buchholz noted that half of young adults believe they may never be able to afford a home, leaving them to foot the bill for the fiscal recklessness of previous generations.

Todd Buchholz

Todd Buchholz (credits: speaking)

He argued that the Treasury could have taken advantage of record low interest rates after the financial crisis by issuing bonds with longer maturities, thereby locking in lower borrowing costs. However, the department largely stuck with short-term borrowing, resulting in higher costs as debt matures and is rolled over.

Despite missed opportunities, Buchholz suggested that future opportunities could arise to secure cheaper debt. He urged the Treasury Department to consider issuing long-term bonds when inflation-adjusted yields fall below historical averages. However, this strategy alone will not address the underlying problem of the massive federal deficits that are fueling the rise in U.S. debt.

Buchholz pointed to excessive government spending as the root of the budget problem, echoing President Ronald Reagan’s analogy that government is like a baby with a voracious appetite and little responsibility. The article concludes with a recommendation to subscribe to the CFO Daily newsletter for continued insights into corporate finance trends and developments.