In the August issue of Prairie Fire, former Colorado Governor Richard Lamm presented his unique view of the fiscal problems associated with the federal budget. The following month, the comptroller general of the United States, David Walker, presented an overview of the public meetings throughout the United States that he and his associates have been conducting. In October, we began a three-part series explaining how one group, The Concord Coalition, proposes to solve three distinct problem areas; the federal deficit, the Social Security actuarial problems and the Medicare dilemma. Now we present the views of another organization, The Heritage Foundation, one of the organizations participating in the Fiscal Wake-Up Tour described in the September issue of Prairie Fire
By Alison Acosta Fraser
Most Americans see our country’s economic history as a steady upward march. Each generation does better than the one before. It has more money, more leisure time, cooler gadgets and a brighter future.
But it’s worth asking whether today’s college students will be able to live out that American dream. And the numbers aren’t promising.
Consider the Big Three federal entitlements: Social Security, Medicare and Medicaid. Congress has spent decades making benefit promises America can’t possibly afford to keep.
Unless Congress acts soon, these three programs will quickly eat up the federal budget. Absent reform, spending on the Big Three - plus interest payments on the federal debt - will exceed total federal tax revenues in two decades, leaving nothing
for defense, homeland security or any other federal program.
The Congressional Budget Office predicts that, unless Congress gets serious about entitlement reform, ever-increasing Big Three expenditures will push federal spending from about 20 percent of Gross Domestic Product today to nearly 50 percent by 2050.
The problems will begin before members of Nebraska’s class of 2012 can even crack their books. Next year the first baby boomers will start drawing Social Security, touching off a ripple that will become a retirement-driven spending tsunami. The long-term tab for these promised benefits? More than $40 trillion. That, plus the national debt, works out to $400,000 for every full-time worker in America today. It’s like having a second mortgage, but no house to go with it.
No baby boomers will have to make these house payments. But their kids and grandkids will. How’s THAT for a legacy?
We can avoid letting this fiscal debacle destroy our nation’s economy and the future of today’s college students. But the options are limited, and none is easy.
Choice No. 1: Raise taxes.
This would certainly improve the revenue-to-expenses imbalance over the short term. But as a long-term remedy, it’s hardly more practical than cutting off your arm to cure the arthritis in your wrist. To pay for promised entitlements via this route, taxes would have to be jacked up to confiscatory levels - like income tax rates two and a half times higher than today - by 2050. Tax levels this high would kill economic growth, eliminate jobs, lower wages and fuel massive unemployment. And they’d have to keep climbing thereafter.
Choice No. 2: Cut spending elsewhere.
Trimming other spending would help, and yes, it’s a good thing to do. But it can’t solve the problem. A “1 percent cut here, 2 percent there” effort is like trying to bail out the Titanic with a Dixie cup. Pulling the plug on pork-barrel spending, for example, would trim only about 2 percent from the budget. Eliminating all waste, fraud and abuse from the federal budget wouldn’t come close to covering the huge, scheduled hikes in Social Security, Medicare and Medicaid spending.
Choice No. 3: Tackle the real problem.
Congress must rethink the premise of a guaranteed benefit for everyone, regardless of their need or their ability to pay.
Tomorrow’s Cornhusker graduates shouldn’t have to pay for their parents’ retirement at the same time they are starting their own family or saving for a house. To lessen the burden for these generations, benefits should be targeted to those who need them the most. Additionally, we should raise the retirement age. Americans are living longer, healthier, more productive lives. Many (think of California Governor Arnold Schwarzenegger) start second careers in later life. Retirement programs should reflect that 21st-century reality.
Too many members of Congress get queasy at the mere mention of reforms such as these. Yet in traveling around the country with U.S. Comptroller General David Walker, experts from the Brookings Institution and The Concord Coalition, and other members of “The Fiscal Wake-Up Tour,” I’ve found that most Americans are very open to these ideas and more. They are willing to give something up as long as they can be sure their needs are met.
People of all ages and from all walks of life want Congress to do the hard but necessary task of putting our nation’s fiscal house in order. The sooner politicians start, the better our chances of leaving today’s college students a better legacy than a ruined economy and crushing debt.