Many Americans are concerned about the large federal budget deficit. We know that carrying a large amount of debt is not good for families or individuals. We worry that large deficits can create an intolerable debt burden for our children and grandchildren who will have to pay it.
These are legitimate concerns. Cutting the deficit would be the smart thing to do if these were ordinary times. But they aren’t. For the next 12 to 18 months while so many people are in economic crisis, the best thing we can do for our children is to maintain a large federal budget deficit. Here’s why.
In the midst of the current crisis, we must run a deficit for the sake of our children. Today our children and their parents are suffering. In January 2010, some 15 million people were officially unemployed, 9.7% of the workforce.(1) An additional 8 million could only find part-time work when they wanted and needed full time. Another 6 million were not officially counted as unemployed even though they do not have jobs and want to work.(2) Nearly one in five workers (18.2%) is either under- or unemployed. Among youth age 16-19, more than one-quarter (26.4%) are unemployed. Among 20-24 year olds, 15.8% need jobs compared with 8.2% among people age 25 and above.
Without work, incomes fall. Even food is scarce. Nearly one in four children lives in a household that relies on food stamps.(3) Overall, one in eight people uses food stamps to keep food on the table.
Meanwhile, the number of delinquent home loans and foreclosures continues to rise. Over one-quarter of the unemployed has been threatened with foreclosure or eviction.(4) The foreclosure contagion first devastated holders of sub-prime mortgages. Now it has spread to holders of “prime” standard loans who have been made vulnerable due to job losses. Nationwide, more than one in seven mortgage loans is either past due or in foreclosure.(5)
Stress on families and children. Faced with these pressures, family life deteriorates. Among the unemployed, nearly half (46%) report that job loss has created a major crisis in their life.(6) Over two-thirds (68%) report feeling depressed, 55% are angry, and 58% report strains in family relations.(7) It is not surprising that four in 10 unemployed parents have noticed behavioral changes in their children related to household stress and over half report their children’s lives have changed “some” or “a lot.”(8)
Our children need to live in strong families that have adequate income and secure housing. Our children need parents whose mental and emotional health is stable. Our children need family resources to attend college or training programs, and they need jobs when they finish school.
The economic crisis has been especially hard on young workers. Researchers have found that someone who graduates at a time of high unemployment faces significantly reduced wages for at least the next 15 years and is more likely to work in a lower level occupation than his or her counterpart who graduated in better economic times.(9)
Young adults already out of school and in the workforce have been especially hard hit by this recession. Workers under age 30 have borne nearly one half of the net employment losses since the recession began.(10) When workers who were laid off during a recession do eventually find jobs, on average they do not regain their old wage levels, even after 15 to 20 years.(11) Their future earnings remain 15-20% below those of their peers who were not laid off.
Fix the crisis first. The U.S. is in an economic crisis. Children, youth, and young adults are being particularly hard hit. The nation’s priority must be ending the crisis. To do this, we must run a large federal government deficit – this is the only tool we have to get the economy moving again. (For more information, see “The Federal Government Deficit: An Essential Tool for Putting People Back to Work and Ending the Economic Downturn” at http://www.ucc.org/justice/financial-crisis/deficit.html.)
In the longer term, the U.S. must get its financial house in order. Federal budget deficits must be reduced. The main drivers of our deficits – health care costs, inadequate tax revenues from corporations and upper-income individuals, and unfunded wars – must be tackled. But for now, let’s stop the bleeding. The best thing we can do for our children, youth, and young adults is to run a deficit and end this crisis. Once the economy has regained some strength, then the deficits must be addressed.
(2)Some have become discouraged and stopped looking for work. Others may have taken on responsibilities like childcare so they are not immediately available to work. For these and other reasons, they are not included in the official count of the unemployed.
(3)DeParle, Jason and Robert Gebeloff. 2009. “Food Stamp Use Soars Across U.S., and Stigma Fades.” New York Times. November 29, A1.
(4)Luo, Michael and Megan Thee-Brenan. 2009. “Poll Reveals Depth and Trauma of Joblessness in U.S.” New York Times, December 15, A1.
(5)Mortgage Bankers Association. 2010.http://www.mortgagebankers.org/NewsandMedia/PressCenter/71891.htm
(6)Luo and Thee-Brenan, 2009. Op.cit.
(7)Marsh, Bill. 2009. “Jobless, Sleepless, Hopeless.” New York Times September 6. Based on polling done by the Heldrich Center for Work Force Development, Rutgers University/Knowledge Networks.
(8)Luo and Thee-Brenan, 2009. Op.cit.
(9)Researchers believe this is probably because people who graduate during a weak economy face a job market with fewer good options and take less preferred jobs, those with lower pay or outside the field for they were trained. Later after the economy improves, they are unable to fully shift into better jobs with repercussions that can last for years and even decades. Wage loss ranges from 1%-20% each year, relative to the cohorts with the minimum state and national unemployment rates. Kahn, Lisa B. 2009.“The Long-Term Labor Market Consequences of Graduating from College in a Bad Economy” http://mba.yale.edu/faculty/pdf/kahn_longtermlabor.pdfAlso see Murray, Sara. 2009. The Curse of the Class of 2009,” Wall Street Journal May 9. http://online.wsj.com/article/SB124181970915002009.html and Grandel, Stephen. 2010. “In a Tough Job Market, Teens Are Suffering Most”, Time. Jan. 18.
(10)Between November 2007 and April 2009, the last month analyzed. Sum, Andrew, Ishwar Khatiwada et al. 2009. “The Great Recession of 2007-2009,” Center for Labor Market Studies, Northeastern University, June, p. 19. http://www.clms.neu.edu/publication/documents/Great_Recession_of_20072009.pdf