April 30, 2004
Bush, Kerry Avoid Domestic Issue No. 1: Boomer Retirement

By Mort Kondracke

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 is 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.

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.

Democratic 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.)

The Congressional 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.

Because of exploding health care costs, Medicare and Medicaid represent 10 times the long-term problem that Social Security poses, according to the CBO.

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.

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.

Bush ought 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:

"My 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.

"We'll 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.

Ford and 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.

Ford also 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.

The NAF's 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 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.

Mort Kondracke is the Executive Editor of Roll Call.

Mort Kondracke Archive

 


 Home...