Bush, Kerry Avoid Domestic Issue No. 1: Boomer Retirement
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 is
no avoiding the crisis, even if current politicians are scared
to death about tackling it.
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.
is simple. Cut the benefits, tax the hell out of the boomers'
children - or figure out better ways of sharing the burden.
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.
A few Members
of Congress have picked up on some of the ideas, but Bush and
Kerry, instead of leading, are running away from the problem.
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.
presidential candidate Sen. John Kerry (Mass.) said that "the
wrong way to cut the deficit is to cut Social Security benefits."
His then-Democratic rival, Sen. John Edwards (N.C.), pronounced
Greenspan's remarks "an outrage." President Bush, who has occasionally
shown a touch of courage on such matters, rushed to assure retirees
and near-retirees that he wouldn't cut their benefits, either.
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.)
Budget Office reported that, without policy changes, the combined
cost of Social Security, Medicare and Medicaid could rise from
8.3 percent of GDP last year to between 14 percent and 17 percent
in 2030 and between 19 percent and 27 percent in 2050. All of
government currently accounts for about 20 percent of GDP.
of exploding health care costs, Medicare and Medicaid represent
10 times the long-term problem that Social Security poses, according
to the CBO.
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.
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.
With a few
exceptions - Rep. Harold Ford Jr. (Tenn.) and Sen. John Breaux
(La.) among them - Democrats fight rigidly to maintain and expand
existing entitlement programs even if they will bankrupt America's
children. Kerry is not in the reform camp.
In the meantime,
Bush has failed to make the "ownership society" a mainstay of
his campaign - not spelling it out in his State of the Union speech,
for instance - and has concentrated instead on foreign policy,
especially on Kerry's weak voting record on defense.
This is a
legitimate issue, except when House Republicans call Kerry "Hanoi
John" and accuse him of "aiding and abetting the enemy" for protesting
the Vietnam War in the 1970s - as if he'd never won a Silver Star.
to be telling the country what he's going to do in his second
term. The closest he has come was in speech to the Republican
Governors Association this winter:
administration understands the importance of ownership in our
society," he said. "We have set a great goal. We want every
worker in America to be a saver and an owner. ... We'll help
more people, of every background, own their own homes and build
their own savings.
help more people to own their small businesses ... [and] health
care plans. We want younger workers to own and manage their
own retirement. ... I believe in private property so much, I
want everyone in America to have some."
It's a heady
concept that has yet to be spelled out, let alone introduced as
actual legislation. And, it entails big challenges. Bush's gigantic
tax cuts and deficits make it practically impossible to finance
an "ownership society." And most of his benefits go to people
who pay income taxes, not to the millions who pay mostly, or only,
regressive payroll taxes.
Sen. Lindsey Graham (R-S.C.) have 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.
supports 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.
Phil Longman, in a new book, "The Empty Cradle," warns that current
dicey projections about the solvency of U.S. retirement programs
are premised on maintaining the current U.S. birthrate and immigration
levels - at a time when birthrates in all industrialized countries
(as well as Mexico) are plummeting.
To keep solvent,
he 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
Do you hear
President Bush or John Kerry talking about any of this? Obviously
not. They are thinking only as far ahead as November.