The American Dream: Is it slipping away?

By Tax Project Team

Published: 04/15/2025

In recent years, the idea that the current generation of Americans faces a worse economic outlook than their parents has taken root in national discourse. Stagnant wages, rising student debt, unaffordable housing, and pessimism about the American Dream dominate headlines and social media. A 2022 Gallup poll revealed that only 42% of Americans believe today’s youth will have a better life than their parents—down from 71% in 1999 (5). Yet, deeper research shows the reality is more nuanced, with significant differences within generational outcomes and opportunities (2),(3),(5).

These perceptions, though, stem from real challenges that reflect deeper systemic issues—including a lack of public understanding about how macro trends creating these conditions and how our government works plays into the impact. Government Financial Literacy—when citizens understanding how public money is raised, spent, and used —is an essential foundation for a better future for America. Without it, Americans risk making decisions that prioritize short-term comforts over long-term sustainability, effectively robbing future generations of the stability and the quality of life that prior generations of Americans experienced while continuing to build upon for future generations.

Generational Comparisons

While it’s true that some younger Americans are doing better than their parents, the broader picture is far from reassuring. A Federal Reserve survey found millennials and Gen Z adults were nearly as likely as baby boomers to report being financially better off than their parents at the same age (5). However, this is largely concentrated among those following traditional middle-class trajectories: stable jobs, college degrees, and homeownership. A Cambridge University study found these individuals have accumulated substantially more wealth than Baby Boomers at similar life stages (6).

But this success is not universal. For many millennials stuck in low-wage service jobs or unable to afford independent living, the situation is worse than it was for comparable Baby Boomers (4). The wealth gap has widened significantly within generations. What we’re experiencing isn’t simply generational decline—it’s rising economic stratification (4),(6). And while some data show signs that the decline in intergenerational progress has slowed (5), ensuring all Americans can get ahead remains a central concern.

This phenomenon is not unique to the U.S. Globally, a median of 57% of people believe that today’s children will be financially worse off than their parents (3). That kind of pessimism reflects a common thread: people sense that structural systems are misaligned with future success (7).

The Growing National Debt: A Threat to Future Prosperity

One of the more concerning yet misunderstood threats to the next generation is the ballooning National Debt. As of 2024, the U.S. national debt has surpassed $36 trillion (9). To put that in perspective, the government now spends over $1.2 trillion annually just on interest payments—more than it spends on education or national defense (9).

The National Debt has increased over $10 trillion in the last 5 years alone, this trajectory is unsustainable (9). These interest payments are not investments in roads, schools, or healthcare—they’re payments to past lenders and serve no productive use to the people or the economy. If left unaddressed, these costs will continue to crowd out essential public services and squeeze future budgets (9).

Even more alarming is the fact that the U.S. has run budget deficits every single year since 2001. That’s more than two decades of spending more than we take in (9). For too long, policymakers have kicked the can down the road. But there’s a limit. Without intervention, interest on the debt could consume nearly 30% of all federal revenue within a generation (9).

Government Financial Literacy Matters

When does Government Financial Literacy become critical for our nation? Most Americans understand the importance of managing personal finances—budgeting, avoiding debt without commensurate returns, and saving for retirement. But relatively few apply the same logic to their expectations of government.

Many voters are unaware of how much the U.S. spends, what the largest programs are, how tax revenue is distributed, and how all of that impacts you and the health of our nation and its impact on America’s future. For instance, surveys repeatedly show Americans overestimate foreign aid spending by up to 25 times its actual amount, while underestimating the size of programs like Medicare and Social Security (10).

This misinformation leads to distorted public debate and ineffective policymaking. A financially literate electorate would understand that:

Most federal spending goes to mandatory programs (e.g., Social Security, Medicare, interest on the National Debt) (9)
Only a small portion of the budget is discretionary, and even smaller for things like infrastructure or education (9)
Spending increases should balance budgets with cuts or revenue and must be evaluated together, not in isolation (9)

In short, better public understanding could drive smarter priorities and realistic expectations.

Direct Impacts on Everyday Americans

You don’t need to be an economist to feel the effects of unsustainable government finance. Consider:

Less Bang for your Tax Dollar: When interest rates rise, the government pays more to borrow—which means fewer funds are available for services like health care, education, social services, etc. (9).
Inflation: Deficits and mounting debt can lead to inflationary pressure, eroding the value of the dollar impacting savings and raising the cost of living (9).
Opportunity: Programs essential to economic mobility—public education, transportation, broadband access—are increasingly underfunded or delayed, reducing opportunity (9).

These outcomes shape the daily reality of Americans. A nation’s budget is a reflection of its priorities. If we continue to borrow to fund consumption today, we are effectively asking our children to pay for it tomorrow—often with interest (9).

Knowledge will forever govern ignorance; and a people who mean to be their own governors must arm themselves with the power which knowledge gives.

James Madison

Tough Decisions and Shared Sacrifice

Improving America’s fiscal future doesn’t mean abandoning government support or social progress. However, it does require making tough decisions.

Sometimes, that means saying no to popular but expensive programs that lack sustainable funding. Sometimes it means accepting modest tax increases to secure long-term benefits like universal preschool or paid family leave. Sometimes it means delaying gratification for the good of future generations.

For a country founded on ideals of independence, self-governance, civic responsibility, and long-term investment in the public good, these decisions should not unprecedented. However, which each passing generation of increased prosperity, we may have lot that connection to the tough decisions of the past. These decisions require an electorate that understands tradeoffs, values sustainability, and is willing to act not just for today’s comfort, but for tomorrow’s opportunity. Even harder, sacrificing a little of their prosperity so that future Americans can enjoy theirs too.

Government Financial Literacy helps citizens:

Ask better questions (10)
Discern between realistic policies and political gimmicks (10)
Engage in constructive civil discourse (10)
Support leaders who prioritize stewardship over short-term wins (10)
Make more informed fact based decisions (10)

Building a Better Future

Organizations like the Tax Project Institute are working to help inform citizens and build that understanding, offering nonpartisan, accessible insights into how public finance works—and how it affects all of us. Our mission centers around transparency, accountability, and education: helping citizens become informed stewards of our future (10).

By informing the public to understand not only what government spends—but how, why, and what the consequences are—we can alter the trend of pessimism and help restore faith in the American Dream(10).

Our children’s future depends not just on innovation or entrepreneurship, but on collective civic duty to promote a properous future for all Americans. If we cannot manage our shared resources responsibly, we undermine the very foundation of opportunity we hope to pass on (9),(10).

Conclusion: Ignorance and Knowledge each have a Cost

America’s challenges are not insurmountable. However, they require a shift in how we engage with public life. We cannot rely solely on elected officials or experts to protect the future—citizens must be informed participants in the democratic process (10).

The national debt is growing at an unsustainable rate. The federal government has run deficits for over two decades. And interest on that debt threatens to consume nearly everything else. Meanwhile, Americans continue to underestimate the impact of their own votes, their own voices, and how these have real consequences to current and future Americans (9),(10).

The answer is not always “more government”—especially when that means borrowing more or spending on poor investments. It’s, also, not always “less government,” either. The answer is smarter government choices, guided by citizens who understand how the system works and what’s at stake (9),(10).

Government Financial Literacy is a Civic Duty and responsibility of each citizen in a Democracy, not something we can trust to a few elected officials, it’s a necessity. For the sake of our children, our communities, and our future as a free and prosperous nation, it’s time we all learned how the budget works—and how to make it work better (10).