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It's Our Fault, Too

By Andrew L. Yarrow
Saturday, April 12, 2008 12:00 AM

The federal deficit halfway through this budget year is at an all-time high, the Treasury Department announced Thursday, and the national debt is growing as well. But before we blame Washington politicians for their irresponsibility, stupidity and cowardice -- and we should -- we may want to look at another culprit: the American people. We, too, bear some responsibility for our $9 trillion federal debt and $50 trillion in governmental promises of future benefits.

Yes, cutting taxes and increasing spending is irresponsible, as is allowing Medicare and Medicaid costs to rise so quickly, as is failing to achieve a long-term fix for Social Security and retirement security, as is developing (and protecting) a Byzantine tax code and dysfunctional budget process, as is pork. Yada yada yada. Washington deserves a lot of blame for the growing national debt, despite some genuinely thoughtful and courageous leaders, and must take the lead in solving the nation's fiscal problems.

But we share the blame. We want lower taxes but more government services. We go to great and morally questionable lengths to avoid paying the taxes that we now owe. We want to stop working as early as possible and draw retirement benefits for as long as possible.

Politicians and pollsters recognize, but wink at, the cognitive dissonance implicit in many Americans' ardent desire for tax cuts and equally ardent desire for more government spending on their needs and pet causes. Whether it is education, the environment, transportation, economic development, defense, job security or assorted other functions of government, polls reliably find strong public support for increased spending, and politicians reliably pander to many of these desires. For example, Americans overwhelmingly say that they want more spent on reducing greenhouse gases and developing alternative energy sources. But do they favor a higher gasoline tax to pay for it all?

As for tax avoidance, millions of American jump through legal and semi-legal hoops -- accountants at their side -- to find ways to nip and tuck their tax bills. Approximately $300 billion in owed taxes go uncollected each year, simply because Americans actively fail to pay them and go uncaught by an understaffed IRS. Hundreds of billions more in tax fraud and cheating are caught and collected. And polls find that one in ten Americans think it's okay to cheat on their taxes.

If IRS staff and audits, which have been cut significantly in recent decades, were beefed up, the returns would be enormous. High-profile prosecution of tax cheating could also help. But while Washington can do more to make taxes simpler and fairer, is it too much to ask for honesty as a price of citizenship?

The issue of retirement is arguably the most difficult. Early retirement has become part of the American dream, but it may not be the best thing for America -- or for Americans.

Aside from its psychological and financial benefits to the individual, work is economically beneficial to the economy and the federal budget. The nation's average retirement age is 62, and three-fourths of 62-year-olds draw benefits from Social Security. If millions of Americans worked until 67 instead of 62, Americans' wealth and consumption would increase appreciably, fueling stronger economic growth. That added income would provide about $800 billion in additional tax revenues, and reduce benefit costs by at least $100 billion in 2045, according to Urban Institute calculations.

This alone, the Urban Institute estimates, would cut the projected deficit in 2045 by 159 percent, reducing the accumulated debt to be passed on to our grandchildren. To encourage such behavior, Social Security benefits taken before age 66 or 70 could be more highly taxed, and employee rates of Social Security taxation could be progressively reduced for each year worked after 66 or 70. Or the government could provide a similar, sliding tax credit for Americans who continue working beyond age 70.

Such changes would not only help our fiscal situation, they would reflect the reality of modern life. When Social Security was enacted in 1935, with full benefits kicking in at 65, average life expectancy in America was 63 and the average surviving worker worked until almost 70. Today, Americans live 15 years longer and stop working eight years sooner.

For the good of both the nation and ourselves, we should at least be able to work as long as our shorter-lived, poorer grandparents did. In doing so, we could help reduce -- rather than increase -- the burden of debt that we pass on to future generations.

The writer is a vice president at Public Agenda and author of Forgive Us Our Debts.

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