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Oct 06, 2004 12:00 am
Back on Sept. 1, Terence Jeffrey, a conservative columnist and current editor of "Human Events," wrote a very sobering piece on what he termed "the coming fiscal civil war." In the not-to-distant future, American citizens and their leaders are going to be forced to make a very difficult choice on how to handle entitlement spending. The coming fiscal civil war isn't necessarily going to be waged on the battlefield of class envy, but will instead be debated along a very unsteady fault line between generations.
On July 8, U.S. Comptroller General David Walker addressed the Senate Governmental Affairs Committee, and offered the hard, cold reality of where our current entitlement system will carry us if left alone.
· Between now and 2035, the number of people who are aged 65 or older will double, driving federal spending on the elderly to a larger and ultimately unsustainable share of the federal budget.
· By 2040, absent reform in entitlement programs, projected federal revenues may be able to pay little beyond entitlements and interest on the debt.
· The federal government's gross debt as of September, 2003, was about $7 trillion, or about $24,000 for every man, woman and child in the nation. But that number excludes many big-ticket items, including the gap between promised Social Security and Medicare benefits, veterans' health care, and a range of other commitments and contingencies. If these items are factored in, the total burden in current dollars is at least $42 trillion.
· One of the biggest contributors to this total bill will be the new Medicare prescription drug benefit, whose estimated current-dollar cost over the next 75 years is more than $8 trillion. Stated differently, the current total burden for every American is more than $140,000, and every day the burden is growing larger.
· GAO's long-term budget simulations show that by 2040, the federal government may have to cut federal spending by 60 percent or raise taxes to about 2.5 times today's level to pay for the mounting cost of the federal government's current unfunded commitments.
The Cato Institute published an article on Aug. 3 which analyzed the Individual Social Security Investment Program Act of 2004 – a bill that was recently introduced into the U.S. Congress. In a nutshell, the act would allow individuals to voluntarily invest their half of the payroll tax, which amounts to 6.2 percent of their paychecks, into individual accounts. The remaining half of the payroll taxes – those contributed by employers – would be used to pay the transition costs and continue paying benefits to existing recipients.
President Bush and the Republican Party are going to make partial privatization of Social Security a second-term objective. As President Bush noted in his acceptance speech at the GOP convention, "In an ownership society, more people will own their health plans, and have the confidence of owning a piece of their retirement. We will always keep the promise of Social Security for our older workers. With the huge Baby Boom generation approaching retirement, many of our children and grandchildren understandably worry whether Social Security will be there when they need it. We must strengthen Social Security by allowing younger workers to save some of their taxes in a personal account – a nest egg you can call your own, and government can never take away."
Actually, many in my generation are not so worried whether Social Security will be around when we need it, but that the existing entitlement system is going to one day break the backs of the taxpayers. A large and growing percentage of us are investing a portion of our own earnings privately for retirement, and have completely written off Social Security.
Given the option of completely withdrawing our payroll taxes from the government-run system and going it alone, many of us would do it. But since that scenario will likely never play out, the current legislation sitting before Congress is an acceptable alternative to the current system.
Since some of you are going to accuse me of wanting to force senior citizens to choose between medicine and dog food, let me state that I have no wish to withhold from any senior citizen the Social Security benefits which he or she has been promised. That Republicans are stealthily plotting to stop the checks to seniors is a scare tactic employed by Democrats to get the AARP endorsement and the elderly vote. It's also completely false, and illustrates why, in conservative circles, Medicare is often dubbed "Medi-scare," and Social Security is affectionately called "Social Insecurity."
Social Security privatization is crucial for two reasons. First, it will help lessen the strain on generations of future taxpayers by completely removing from them the demand to fund the retirements of elderly citizens. Second, privatization will give American workers complete control over their retirement accounts, rather than being at the mercy of the federal government. Of course, individual control and its belief that Americans are too stupid to plan for retirement are the reasons you can count on the Democratic Party to oppose any effort to privatize Social Security.