A former White House economist has raised concerns about the soaring levels of U.S. debt, warning that it poses a significant burden on Generation Z. Todd Buchholz, who previously served as White House director of economic policy, emphasized that Gen Z already faces numerous challenges and growing pessimism, with high borrowing costs hindering their ability to enter the housing market.
Buchholz highlighted the role of previous generations, including baby boomers and millennials, in contributing to the escalating debt levels that Gen Z will ultimately inherit. Despite the long-standing trend of increasing U.S. debt, recent years have seen it surpassing significant milestones, such as exceeding the level observed in the aftermath of World War II. The cost of servicing this debt is projected to surpass defense spending this year.
Prominent figures like Federal Reserve Chairman Jerome Powell and CEOs of major financial institutions have sounded alarms about U.S. debt. However, Buchholz emphasized the specific challenges faced by Gen Z, noting that half of young adults doubt their ability to ever afford a home while being burdened with the consequences of previous generations’ fiscal decisions.
Buchholz pointed out that there was an opportunity to mitigate the debt outlook by taking advantage of historically low interest rates. The Federal Reserve’s monetary stimulus post-Great Financial Crisis kept Treasury bond yields at historic lows, offering an opportunity for the Treasury Department to issue longer-term bonds at favorable rates. However, the Treasury largely stuck to short-term borrowing, resulting in higher costs for rolling over maturing debt.
Despite calls for issuing longer-term bonds, Treasury Secretary Janet Yellen indicated in March 2021 that there were no immediate plans to do so. This decision has been criticized by figures like hedge fund manager Stanley Druckenmiller, who referred to it as a significant missed opportunity. Today, bond yields have risen substantially, further exacerbating the debt burden.
