The Legacy

President Trump gave a magnificent speech last week, probably the strongest speech before Congress since Ronald Reagan, perhaps even better.   He was well coached, the tone was uplifting and optimistic, and it contained none of the usual Trumpist colloquialisms like “believe me.”   He talked about job creation, border control, rebuilding the military, and strengthening education.

Democrats Keith Ellison and Debbie Wasserman Schultz made fools of themselves by remaining seated when Trump honored the widow of fallen Navy SEAL  Ryan Owens.  Nancy Pelosi looked like she was having kidney stones.  The Democratic response was delivered by former Kentucky Governor Steven Beshear, who looked like some tired old career Ace Hardware floor salesman that delivered standard Democratic boilerplate that didn’t even match Trump’s speech.  Even Van Jones admitted that Trump had come into his own and said that if he keeps doing this, he will be in office for eight years.

He addressed a number of high priority issues, but omitted an important one---debt.  He was, and has been, more focused on our trade deficit than our fiscal deficit and debt, and that, I believe, is misplaced.

The past few years have seen a surge in social stress and tension, putatively over race, gender, class, ethnicity, even bathroom use.   But any justification of those frictions pale in comparison with a schism that has been rarely spoken or written about---generational.

The basis of the American dream is that no matter what indignities or traumas you have suffered, no matter how exhausting, tedious, or inconsequential your feel your own life may be, you can trudge off to work, lunch bucket in hand with the knowledge that you are providing an opportunity for your children to have a better life and greater opportunity.

Our generation and the immediately preceding generation have  done precisely the opposite.  We have done it with debt.  We have burdened these kids with enormous amounts of the stuff on every level.  And none of us can escape this ugly reality.  We elected politicians over the last 50 years that overtly and sometimes surreptitiously stole from them so that we could consume things today.

That is the constraint Mr. Trump has to deal with and  has yet to speak to.

On the national level, we are about to click over the $20 trillion dollar mark, and that is a debt burden being managed with historically low interest rates.  The State of Illinois has $11 billion in unpaid bills and $130 billion in pension obligations. The City of Chicago has  $33 billion of debt and pension obligations.  The Chicago Public School system has $11 billion—20% of its budget goes to servicing debt and paying pension obligations. 

But wait, there’s more.  Pre-housing crisis,  much of college tuition was being funded by mommy and daddy’s home equity lines of credit.  Now that home equity has evaporated, student loan debt is soaring.   We took that debt from mom’s and dad’s balance sheet and put it on to the kids’ balance sheets.   And this occurrence is a direct result of policies that our politicians set in motion.

Think about what we have done to these kids.  Let it sink in.  We voted for politicians that enabled this to happen, and we didn’t pay enough attention to what they were doing.   They created incentives for people to borrow money and keep buying bigger and bigger houses and borrow to do it, whether or not you thought you could pay it back and punished financial institutions or threatened to if they didn’t lend.  Now the escalating college costs are piling up on the balance sheets of young people.

We’re telling this younger generation  about the American Dream and yet it’s as if we’ve asked them to swim across the English Channel but putting 20 pound weights in each hand.  To add insult, in the near future we will be demanding that they not only pay the debt we incurred but change our diapers, feed us, and walk us in the park.

Our forebears left us with a vibrant, growing country piloted by a functioning democracy.   We’re leaving our children with an enormous mountain of debt on multiple levels.    Yet few are talking about it.  It wasn’t even discussed in any serious way during the election.

The only real attempt to address debt was the Bowles Simpson Commission-the best idea to come out of the Obama Administration.  Bowles Simpson was the bipartisan commission that came up with a compromise plan, a mix of revenues and spending cuts that were to address the deficit.  It was a solid plan, and, of course, it contained items unpopular with both the left and the right.  Obama promptly smothered that baby in its crib and we haven’t had any serious efforts at it since.  

Now along comes Donald Trump, who has announced that he wants to substantially increase military spending (needed, in my view), spend a trillion plus on infrastructure (I predict that he will get this done with little resistance; Congress LOVES to spend money), cut corporate taxes and individual taxes.    I simply do not see how the math works, especially with interest rates forecasted to rise by at least 75 basis points this year alone.   Only Alan Simpson and David Stockman (admittedly cranky guys) are sounding the alarm at the moment.   

Debt at all these levels is suffocating our young.  In his book House of Debt, Amir Sufi notes, “Debt is a harsh instrument.”   Likewise, foreign policy expert  Richard Haass warning of far reaching implications for our inability to deal with our debt, observes in his new book, A World In Disarray,  “The strategic consequence of growing indebtedness are many and worrisome.  The need to finance the debt will absorb an ever increasing number of dollars and an ever increasing share of the U.S. budget…..Mounting debt will raise questions around the world about the United States.  U.S. inability to deal with its debt challenge will detract from the appeal of the American political and economic model.”  Excess debt is constraining, confining and limits options, whether it is an individual, a corporation, a state, or a nation.  It hands at least some control over your destiny to others.

The trends appearing in our younger generation are not encouraging.  Marriage rates among them are down.  They are less mobile.  They are not buying houses.  Birth rates are down (a recent article addressing this phenomena was entitled, “Make America Mate Again”).  Most troubling to me is that they are less entrepreneurial and about half as likely to start a business as a generation before.   

I suspect that this big overhang of debt at every level has a lot to do with it.  These trends are symptomatic.  We have effectively turned them into our slaves.  We continue to demand that they turn over a larger and larger share of their earnings to pay debts that we incurred or that we pushed onto them.  And I believe that it has a role to play in the social resentments that are bubbling to the surface.   We’re genetically programmed not to be resentful of our forefathers and mothers, our parents and grandparents.  It’s easier to be resentful of someone that is of a different race, gender, class or whatnot.   The more justified  anger and resentment should be leveled at those that spent their money and handed them the bill.

Yes, we saw a different Donald Trump address Congress; he struck a different tone and had some interesting things to say.  He referred to the approaching 250^th birthday of our nation in nine short years.  But he failed to address a large aspect of the legacy we will leave our children on our nation’s 250^th birthday.  If they are to thrive and prosper, it cannot be a legacy of debt.