The Coming Welfare State Collapse
Newsweek’s Robert Samuelson talks about the issue none of the Presidential frontrunners in either party are willing to each discuss:
Aug. 6, 2007 issue – If you haven’t noticed, the major presidential candidates—Republican and Democratic—are dodging one of the thorniest problems they’d face if elected: the huge budget costs of aging baby boomers. In last week’s CNN/YouTube debate, New Mexico Gov. Bill Richardson cleverly deflected the issue. “The best solution,” he said, “is a bipartisan effort to fix it.” Brilliant. There’s already a bipartisan consensus: do nothing. No one plugs cutting retirement benefits or raising taxes, the obvious choices.
Here’s a clue for those of you out there. Whenever you hear any politician, Republican or Democratic, respond to a question about an issue by talking about developing a “bipartisan consensus,” it means one of two things. Either they don’t have any idea how to address the problem to begin with, or they know how serious it is and what it’s going to take to fix it, but don’t have the courage to tell the American people the truth.
The aging of America is not just a population change or, as a budget problem, an accounting exercise. It involves a profound transformation of the nature of government: commitments to the older population are slowly overwhelming other public goals; the national government is becoming mainly an income-transfer mechanism from younger workers to older retirees.
Consider the outlook. From 2005 to 2030, the 65-and-over population will nearly double to 71 million; its share of the population will rise to 20 percent from 12 percent. Social Security, Medicare and Medicaid—programs that serve older people—already exceed 40 percent of the $2.7 trillion federal budget. By 2030, their share could hit 75 percent of the present budget, projects the Congressional Budget Office. The result: a political impasse.
The 2030 projections are daunting. To keep federal spending stable as a share of the economy would mean eliminating all defense spending and most other domestic programs (for research, homeland security, the environment, etc.). To balance the budget with existing programs at their present economic shares would require, depending on assumptions, tax increases of 30 percent to 50 percent—or budget deficits could quadruple. A final possibility: cut retirement benefits by increasing eligibility ages, being less generous to wealthier retirees or trimming all payments.
Some who have written about this issue in the past have raised the spectre of generational political warfare pitting the old benefit recipients against the young who are forced to spend more and more of their tax dollars to support those people. And it may come to that if we don’t do something now.
And by “do something” I’m not talking about another band-aid affixed to Social Security and Medicare that pushes the day of reckoning out another 20 years or so. I’m talking about a permanent solution that, quite honestly, brings to an eventual end a welfare/retirement state that never should have existed in the first place.
Do I think there’s any likelihood of that happening before the crisis actually happens ?
Not at all.
H/T: Jason Pye