A Fundamental Shift in Thinking

Robert J. Samuelson is correct. The presidential candidates are ignoring the elderly entitlement crisis. Unfortunately, the media is an accomplice. One of the problems with our overly polarized, media-driven political system is that it is more important to win the argument than to find a solution.

Samuelson goes off course in his suggestion that no think tank is working on this or dealing with these issues in a comprehensive way. At the National Center for Policy Analysis (NCPA), elderly entitlement spending has been one of our highest priorities, and we always look at programs together.

One of the first steps in any reform effort, especially one that involves the type of radical reforms this is going to require, is to educate the public about the nature of the problem. NCPA Senior Fellow Laurence Kotlikoff has written extensively about the coming generational storm. And no one has done more to collect the numbers and alert the public than NCPA Senior Fellow and Trustee Thomas Saving.

How significant is the problem? According to Saving, Medicare and Social Security combined are on track to eat up the entire federal budget. The trustees estimate the 75-year burden on general revenues from these two programs at $31.9 trillion, more than six times the current outstanding federal debt. Looking beyond 75 years into the indefinite future, the combined long-run funding gap is $74.8 trillion in today's dollars.

Congress will not have to wait long to feel the pinch. Last year the combined deficits in the two programs claimed 5.3 percent of federal income tax revenues. In 15 years these two programs will require more than a fourth of income tax revenues. By 2030, about the midpoint of the baby boomer retirement years, these two programs will require almost half of all federal income tax dollars. By 2040 it will require two-thirds. You see where this is going?

What can be done? We're working on that, too, but its going to take some political courage and a fundamental shift in thinking about entitlement programs. It means we are going to have to start thinking about choosing between health care and other uses of money. It means we are going to have to start thinking about having each generation of retirees save for their own retirement and their own retirement health care needs. If we wait too long, the solutions will be drastic and painful.

John Goodman
President, National Center for Policy Analysis