Wednesday, February 25, 2004
Bitter medicine
Today, Alan Greenspan took to his soapbox and told the nation
something that it did not want to hear: Social Security
is unsustainable and its costs have to be cut back. This is
common sense, given that the necessity of the action is driven by
the demographics of the nation and those demographics are obvious
many decades in advance; the age cohort due to take normal
retirement in 2008 was in kindergarten in 1948. Nobody who
was watching the news the last time Social Security was re-vamped
in the face of a crisis (the first Reagan administration) has an
excuse if they did not see this coming.This long-overdue bit of sanity was promptly denounced by members of both major parties. Predictably, the Democrats appeared to be both louder and less compromising (as befits their socialist tendencies like the French [hat tip: Stephen Den Beste]). John Kerry said "... the wrong way to cut the deficit is to cut Social Security benefits. If I'm president, we're simply not going to do it." His rival John Edwards said Greenspan's comments were "an outrage." Republican responses were as much in favor as an outright evasion can be; Dennis Hastert was so brave as to stand up and say, "He's a fine man."
None of which deals with the issues facing the nation, and the fundamental issue of equity: why should a large, long-lived generation, having paid reasonable but not overly large benefits to the smaller and shorter-lived generation before it, expect generous payments and unprecedented levels of medical treatment from the smaller generation which comes after it - for the duration of a greatly extended retirement?
While rationality may say that the system is so broken that it should be scrapped immediately, reality is that this isn't going to happen. But politics is the art of the possible. It may be possible that pols can get votes arguing for fairness: if you are going to live longer, you should work longer and pay for longer to justify your comfortable retirement. It is not fair that people trying to buy houses and raise families should have their taxes jacked up so that others can continue to retire well short of age 70 to have 15 or more years of leisure. Forget the children, who are in their 40's and 50's; won't somebody think of the grandchildren?
Had the demographic problem been addressed in a sane and sensible fashion in 1983, it would have been simple: raise the retirement age by one month per year, with "leap months" as necessary to keep the fraction of retirees smaller than some statutory maximum. Had this been implemented in 1985 the retirement age going into 2003 would have been 66.5; hardly a stretch, but a big boost to the bottom line. Social Security taxes could have been reduced, as the need for the surplus to carry the Boomers would have been smaller. The lower taxes would have boosted the economy, and the elimination of the "Social Security surplus" and its additional borrowing power would have shown the irresponsibility of the Washington pols' spending.
All of this is wishful thinking. Nobody in Congress in 1983 was ready to fix the problem properly, and anyone who proposed such would have been demagogued to death. It is now 21 years later; an entire generation has gone from birth to drinking age. The crisis is 21 years closer, 21 years have been wasted, and the only pols who aren't still busy demagoguing to death the voices of sanity are too timid to find their own.
The last time anything was changed the Social Security trust fund was within months of running dry. The "fix" was a massive tax increase combined with equally massive denial of the true nature of the problem. Instead of catching the disease and treating it early, it continues to grow. When we finally face the need to act, how much bitter medicine will we have to swallow?
UPDATE
The statement by Greenspan seems to have made the issue newsworthy. The treasurer of Australia, Peter Costello, is on the same page (hat tip: Randall Parker).Reports Stuff, "The Treasury paper to be released today warns that the longer Australia does nothing about demographic changes, the bigger the reforms that will be necessary in future." The big question: Will this message be accepted Down Under, or will the demagogues deny reality and continue to get a free pass from the voters?
UPDATE
I have received a pointer to The Retirement Calculator from Hell.¶ 2/25/2004 09:01:00 PM
