May 2 2013

Young Workers Should Rest Uneasy When Politicians Make Big Promises

Forbes

Carrie L. Lukas

Politicians use pledges to make their priorities and commitments clear to voters.  Unlike carefully worded campaign ads and position statements, pledges eliminate a politician’s wiggle room.  That’s why young Americans should pay attention to a new pledge garnering signatures among Democrats.  While sold as a promise to protect key entitlement programs, it’s effectively a pledge to bury workers under higher taxes and further shift government’s funding toward subsidizing retirement.

The letter, drafted by Reps. Alan Grayson (D-FL) and Mark Takano (D-CA) and addressed to President Obama, pledges to protect Medicare, Medicaid, and Social Security benefits, with the signatories promising to voting “against any and every cut to Medicare, Medicaid, or Social Security benefits — including raising the retirement age or cutting the cost of living adjustments that our constituents earned and need.”

Young Americans may think that sounds like a fine promise to make.  Social Security and Medicare likely don’t mean much to them today, but most support the concept of a government safety net and want Social Security and Medicare to be there for their grandparents.  But Millennials be warned: The status quo isn’t an option.  Opposing any and all benefit cuts means something else will have to change to prop up these programs.  That’s because, though this reality is downplayed in this pledge letter, these entitlement programs are in financial trouble.  Big trouble, in fact.

The financial crisis facing government entitlement programs isn’t the fantasy of right wingers determined to destroy government safety-nets. It’s a simple fact, and a fact that young workers should become familiar with, since it will profoundly shape their financial futures.

Whether they consult the Congressional Budget Office, the entitlement programs’ trustees, or outside watchdog groups, they will find that all sources warn of the same dynamic: Steadily rising program costs that absent reform will eat up the lion-share of the federal budget or lead to significantly higher taxes on working Americans.

The President’s fiscal commission put it this way: “By 2025 [projected federal government] revenue will be able to finance only interest payments, Medicare, Medicaid, and Social Security. Every other federal government activity – from national defense and homeland security to transportation and energy – will have to be paid for with borrowed money.”

The Social Security Trustees explain it differently, highlighting how the cost of Social Security’s benefits as a share of American workers’ taxable earnings will climb from 11.3 percent as of 2007 to 17.4 percent in 2035.  That means a 23-year-old recent college graduate struggling to find a job today can expect to be paying one out of every six dollars she earns to Social Security when she’s 45.  She’ll then still have to pay for Medicare, which is expected to eat up about another 6 percent of payroll.  Of course, she’ll also have to pony up for other trivial matters, like Medicaid, defense, environmental programs, food stamps, welfare, education, local law enforcement, and to pay interest on the trillions of dollars of debt that accumulated before she could vote.

One can quibble about the exact forecast—how quickly life expectancy will climb, how more robust economic growth or lower health care costs might affect these projects—but the big picture is clear.  People are living longer and the ranks of the retired are swelling, which means all these programs are getting much more expensive and someone will have to pay for them.

Signatories to this entitlement pledge suggest that squeezing more from big corporations and the “rich” and a job-boom will be sufficient to meet those obligations.  That’s a fanciful assumption, but let’s assume it’s true:  The federal government really will be flooded with enough revenue to support the benefits currently promised by our entitlement programs.

Do young Americans really think this is really the best use of government resources?  Is subsidizing the lifestyle of even wealthy retirees—protecting every last penny of their monthly Social Security checks and health care benefits during what is now often a three-decade long retirement—our nation’s top priority?

Young Americans, generous of heart, should note that proposals to reform our entitlement programs—from the Social Security changes proposed by the Bush Administration to those recommended by President Obama’s Fiscal Commission—overwhelmingly make the programs more progressive.  They would augment benefits for poorer beneficiaries, while reducing government payouts to seniors who the Left, in other circumstances, would call “the rich.”

With a little investigation, young Americans will find this pledge isn’t compassionate and isn’t about protecting vulnerable seniors.  It’s a pledge to give young workers the shaft.

Comments
blog comments powered by Disqus