Social Security for Millennials: The Need for Budget Equity Across Generations

Photo: thedailysheeple.com

FRANK FRITZ, EQUAL JUSTICE DIRECTOR

In the wake of the Great Recession, state governments made massive cuts to public spending due to declining tax revenues (an average decrease of 17%) and increased emergency spending on those affected by the economic downturn. Budget cuts have been justified for years by invoking the need to prevent future generations from incurring excessive debt.

Ignoring the other looming budget deficit that past generations put on youth and the planet, it is ironic that one of the most brutally slashed areas was education . A study by the think tank Demo found that “[s]ince the recession, 28 states have cut per-student funding by more than 25 percent.” In real terms, that amounts to 220,762 teachers (5.6% of the entire public teaching workforce) losing their jobs between 2009 and 2011.

The concern for the welfare of future generations rings hollow when public officials see spending on education as a burden to future generations, instead of an investment in future innovation, productivity, and quality of life.

Chart: fivethirtyeight.com

“For decades, we have piled deficit upon deficit, mortgaging our future and our children's future for the temporary convenience of the present.” (Ronald Reagan, First Inaugural Address). [The national debt tripled under President Reagan’s administration.] 

“We can’t mortgage our children’s future on a mountain of debt.  [...] We can’t run up our credit card, have a party, and leave our children to pay the bill.” (Barack Obama, Speech in La Crosse, WI 10/1/2008) [The national debt has doubled under President Obama.]

As K-12 education funding has contracted, state funding for higher education suffered a steep drop, worsening a decade long trend of steady decline. At its current pace, government higher education spending is on track to reach zero percent of total spending on colleges and universities by 2059; if that were to happen, it would be the virtual end of public universities. While it is unlikely for this trend to continue that drastically, it betrays the low priority of higher education in fiscal policy. State and local government spending on higher education peaked in 1975 at 60.3% of all college spending and fell to 34.1% in 2010, even when federal spending is taken into account. The American Council on Education notes, “Inflation-adjusted tuition charges that were declining 

in the 1970s have surged since 1980. Inflation-adjusted tuition and fee charges have increased by 247 percent at state flagship universities, by 230 percent at state universities and colleges, and by 164 percent at community colleges since 1980.”

Meanwhile, many competing industrialized nations have done away with tuition all together. Demos finds that “when states cut higher education funding, schools essentially have two options for closing the gap: raise student charges—tuition, fees, room, and board—or cut salaries and services. Most states have chosen to [...] [implement] steep hikes in charges for tuition, room, and board, and [cut] thousands of course offerings and positions.”

Chart: demos.org

Then it hould come as no surprise that the US college degree attainment rate has stagnated among the youngest adults. Students who did to go to colleges and university have accrued over $1.2 trillion in student debt. The decline in state grants to schools has lead to the federal government generating between $5.5 and $36.3 billion in profit on the loans it offers students to help them finance their increasing costs. Yet, as The Atlantic pointed out last year and again this year, the federal government spends more on higher education grants and tax breaks than all public college and university students (approximately 75% of all college students) pay in tuition. Put another way, all public college and university students could attend their institutions tuition free if the government directed all 

current federal tax breaks and grants to assist them, instead of towards private universities that disproportionately escalate the rising cost of higher education.

Even amid the draconian cuts to primary, secondary, and tertiary education, many politicians are pursuing the laudable goal of further expanding education before Kindergarten, as well. Mayor Bill De Blasio of New York City ran his 2013 campaign on a platform to independently fund pre-K through a tax on high income earners. The tax portion of the plan was scrapped by New York Governor Andrew Cuomo in lieu of a separate statewide Pre-K plan, but the Mayor’s plan illustrates the a vision in which education is not subject to cuts by state authorities thanks to a stable revenue source.

The oscillation of state, county, and municipal government revenue, coupled with their constitutional balanced budget requirements, make local governments unfit patrons of our pre-K through college educational system. It should, and ultimately, must fall upon the federal government to finance the educational system while allowing local governments to remain in control of administration. A precedent for federal assumption of state liabilities dates back to the administration of George Washington 

Chart: oecd.org

and his Treasury Secretary Alexander Hamilton. Hamilton believed that the federal government could better finance war debts and, in doing so, build a more integrated national economy. The federal government’s first foray into civilian higher education was the Morrill Act of 1862, creating a system of land grant universities to teach and research military tactics, agriculture, mechanical arts, and classical studies.  

Yet, as the debt ceiling battle and the sequester have shown, the discretionary budget (including defense and most federal offices), while solvent, is at the mercy of the daily political ebb and flow. A new financing system for education should be modeled after Social Security and Medicare, which are not-discretionary programs that are automatically funded, even during a government shutdown.

In addition to increasing the stability of education spending during a recession, funding education as a federal non-discretionary program could offer many other benefits. Primary and Secondary schools would see their funding de-coupled from local property tax revenue, allowing for more equity in funding regardless of real estate values in a given school district. In a federally funded higher education system, “in-state” tuition could be expanded nationwide. This could allow schools to specialize in specific fields and attract the best talent from around the country. With stable funding, public colleges and universities reverse the trend of rising higher education costs, and put economic pressure on non-profit and for-profit schools to follow suit in order to remain competitive.

How would such a system be financed? Social Security, Medicare, and Medicaid, designed as worker insurance policies, charge the FICA tax on employees and employers. The current system of property taxes, state income taxes, and sales taxes all have flaws. Property taxes deny low income communities the funding that higher income communities receive. State income taxes can be affected by regional downturns in the economy, and sales taxes shift the heaviest burden on low income families with the least disposable income. A new system designed to benefit youth could be funded in a way that actually solves in another intergenerational crisis, global climate change. While past generations have been able to pollute without concern for the impact on their children, a truly progressive solution to promote equity and security for young people would be to finance a new American educational system through a tax on Carbon emissions and other greenhouse gases.

Millennials (born between 1980 and 2000) and the generations that come after us have much to gain from such a system. While the 78 million Americans born in the wake of World War II (the “Baby Boomers”) begin to collect Social Security, Millennials continue to collect college debt, as their younger siblings see their grade school teachers laid off.

Chart: pewresearch.org

The Boomers, who also have the distinction of being the wealthiest generation in history, are no longer the largest generation in America, as they have been supplanted by 95 million Millennials. However, there has yet to be a marked shift in policy when it comes to favoring older generations in our government. Voter turnout among those 18-24 fell from 48.5% to 41.2% between 2008 and 2012, just as turnout among the 65 and older demographic rose from 70.3% to 71.9%.

This means that the best way to solve budgetary inequity is to convince Millennials to assert their economic interests, first and foremost by voting. Today, people born after 1980 make up 25.5% of the voting age population, and in 2020 they will make of 36.5% of voting age citizens. By increasing 

youth turnout, Millennials and successive generations will have the power to reset the fiscal agenda at every level of government and being the work of achieving budget equity.

For more information on how to mobilize on issues important to Millennials, you can check out Generation Progress. To get more information on how to vote, visit the Electoral Assistance Commission website. If you like public policy and would like to learn more about progressive solutions facing the country consider joining the GW Roosevelt Institute, or find your local chapter here.