Will retirement benefits be there?
The Bush and Kerry campaigns are playing the public for fools, avoiding one of the biggest questions in America’s future: how to finance the retirement of the baby boom generation.
It’s a monstrous problem that will either break the American economy or — if addressed creatively and soon — revitalize it. Demographically, there’s no avoiding the crisis, even if current politicians are scared to death about tackling it.
The boomers, 77 million of them, will begin retiring in just six years, drawing huge Medicare and Social Security benefits. Right now, the taxes of just three workers support the benefits payable to each current retiree, compared to 16 workers back in 1950. When most of the boomers are retired, the burden will be carried by just two workers.
The choice is simple. Cut the benefits, tax the hell out of the boomers’ children — or figure out better ways of sharing the burden.
In fact, some good (if controversial) ideas have been proposed, many at the New America Foundation, a independent centrist think tank. They include lifetime savings accounts, means-tested Medicare, a policy of stimulating healthier lifestyles and less-costly but better-quality medicine, and efforts to encourage greater birth rates and higher immigration levels to grow the nation’s population.
Federal Reserve Chairman Alan Greenspan in February only had to mention the prospect of changing the basis of calculating benefits before howls went up from Democrats. President Bush promptly dove for the tall grass.
But the problem won’t go away. The trustees of the Social Security and Medicare systems reported in March that Social Security’s surplus will disappear in 2015 and that Medicare will run out of money in 2019, seven years earlier than was forecast just a year ago. (Bush’s prescription drug proposal was the main culprit.)
Because of exploding health care costs, Medicare and Medicaid represent 10 times the long-term problem that Social Security poses.
From time to time, President Bush has suggested a viable approach to the overall problem — one with the theme of “the ownership society,” in which people would be helped to save and finance their own health care, education and retirement.
Kerry has nothing comparable, or positive, to offer. Instead, he criticizes Bush — legitimately — for tax-cutting the country into deficits and debt that will burden future generations and — illegitimately — for wanting to “privatize” Medicare and Social Security.
Sen. Lindsey Graham (R-S.C.) has proposed a novel Social Security reform plan that involves reducing benefit growth and giving workers under 55 the option of staying in the current plan and paying higher taxes, paying current tax rates and receiving only the benefits that they will earn, or establishing a personal savings account with a portion of their payroll taxes.
There is also congressional support for the New America Foundation’s idea of establishing a savings account for every child, untouchable until age 18, that would give every American a stake in the economy, encouraging savings-that is, investment capital.
The NAF’s Phil Longman, in a new book, “The Empty Cradle,” argues, the United States needs to get medical spending under control — mainly by encouraging healthier lifestyles — and encourage population growth, partly by making work and family life easier to juggle.
Do you hear President Bush or John Kerry talking about any of this? Obviously not. They are thinking only as far ahead as November.
Morton Kondracke is executive editor of Roll Call, the newspaper of Capitol Hill.