High levels of student debt and unemployment are dragging down 20-somethings, who aren’t participating in the economy like their predecessors, two economists said in Durango on Wednesday.
“Young folks who are coming out of school with more debt than ever are having a hard time getting that first job,” said Phyllis Resnick, lead economist at the Colorado Futures Center, based at Colorado State University’s Denver Center.
That delay in entering the workforce can weigh on a worker’s future earnings for the entirety of his or her career, she said.
Resnick joined Charles Brown, director of the Colorado Futures Center, in presenting an update to the Colorado Futures Center’s state budget forecast. The event at the La Plata County Extension Office drew a sparse group of local government and business officials.
Resnick painted a picture of a generation that, in financial terms, is not all right. Twenty-somethings are delaying many of the milestones that fuel the economy: marriage, childre and purchasing a home or a new car. Many return to live with their parents after college.
They also tend to be less interested in homeownership than their parents’ generation.
“Instead of seeing a house as an investment, they saw their parents underwater in a house. They see it limiting their mobility,” Resnick said.
An “underwater” house means the home carries more mortgage debt than sale value.
A major headwind facing 20-somethings, Resnick said, is student loan debt. Nationally, student debt now tops $1 trillion, exceeding credit-card debt and auto-loan debt. Only mortgage debt remains higher than student loans.
Resnick said she expects these patterns to continue, eventually affecting the state budget through lower sales-tax revenue. State and local governments may need to consider expanding sales taxes to cover services, she said. “We’re concerned that sales tax over the years will become a less robust source of revenue.”
Consumers are spending more money on services – everything from haircuts to outdoor adventures – and less on goods. Some of La Plata County’s best-known services – such as tickets to ride the Durango & Silverton Narrow Gauge Railroad or ski lifts at Purgatory at Durango Mountain Resort – are not subject to sales tax.
“We are service consumers now, and our tax system does not match that,” Resnick said.
The study discussed Wednesday updated an earlier analysis released in 2011. Since then, the budget outlook has improved, Brown said.
But that’s only for the short term. As the study’s forecast horizon in 2030 approaches, it gets worse.
Resnick said dramatically expanding health-care costs must be addressed.
“If we don’t handle health-care costs, we’re going to bankrupt everyone in this country,” she said. “We’re going to bankrupt every household. We’re going to bankrupt every government. We’re going to bankrupt every business.”