Who Pays for Past Mistakes
Generational warfare: It’s bound to happen here in Rhode Island with the pension crisis. It’s also happening nationally on the budget deficit debate with the new Super Congressional panel set to convene. Education Policy wonk Rick Hess offers his perspective:
You’re either with the kids or with those rushing to the ramparts to defend retiree entitlements. So, which is it?
Consider the President’s vague calls last week to spend billions more on school construction and preserving school staffing levels (which would’ve been more compelling if he had offered any inkling as to how we might pay for it). Obama finds himself unable to do more than offer marginal, dead-on-arrival programs because the feds have spent more than half the budget just mailing checks to retirees, covering health care bills, and paying interest on the accumulated debt. Everything else—schools, financial aid, the FBI, defense, transportation, the environment, NASA, foreign aid, you name it—has to make do with what’s left.
As Julia Isaacs at the Brookings Institution has pointed out, the federal government now spends about $7 on seniors for every $1 it spends on children….Do we really think it’s a good idea to spend half of all non-interest spending on making retirement ever more comfy?
Past or future? Which will it be? He provides an important breakdown of we pay for current Medicare spending:
[T]oday’s retirees have contributed taxes that amount to less than half their Medicare outlays. Today’s Medicare payroll tax doesn’t fund Medicare–it funds only Part A (hospital expenses). Premiums cover just 25 percent of Part B (doctor treatments and visits). And premiums for Bush’s Medicare drug program (Part D) cover just 10 percent of the cost. The rest of the hundreds of billions in outlays for these programs is vacuumed out of general revenue. (See here for a good breakdown on Medicare funding.)
And Social Security:
Social Security has the government reflexively spending hundreds of billions to mail out monthly checks to the wealthiest segment of the population, without an ounce of thought as to whether that’s the best use of borrowed funds (the famed Social Security “trust fund” being, you know, nonexistent). The Social Security Administration reports that more than 20 percent of those 65+ have incomes over $65,000 a year. In a nation where median household income is in the $40,000s, is it really radical to rethink how much we mail to these households every month?
As for taxes:
Toss in all of the tax deductions that President Obama called for eliminating this summer, including the corporate jet deal, and you address another $400 billion over 10 years, or less than 2 percent of the shortfall. So, just keeping the deficit from exploding will involve all those taxes and trillions more in cuts. Those demanding substantial new spending then need to raise hundreds of billions beyond that, through additional cuts or tax increases….Even with hefty tax increases, protecting existing entitlements ensures that we won’t have much available for schools, colleges, or anything else.
He urges education advocates to step up to the plate and take on the AARP and similar groups so that more money can go towards kids and education.
In short, it’s possible to get our house in order, free up dollars for schooling, and shift dollars towards youth. But doing so requires facing down the massive, intimidating seniors’ lobby.
Shared sacrifice involves asking Baby Boomers and retirees to step up and, you know, sacrifice. It doesn’t mean holding harmless the generations who voted themselves free stuff through the good times and doesn’t rely almost entirely on raising taxes and curtailing benefits for the under-40 set.
Hess’ bailiwick is education and his goal is to increase funding for it. Regardless of whether you agree or disagree with Hess’ priorities, his argument helps to lay out the choice that needs to be made: should the people who benefited or made the mistakes in the past be held most accountable for those mistakes? Or should their kids and grandkids?