Continued from page 1

Curb entitlement spending

The editorial “Entitlements run amok” (Wednesday) provides much-needed prominence to future-oriented measures of how large the gap is between projected federal expenditures, especially on entitlements, and available future revenues under current policies. The Social Security and Medicare trustees have been providing this information for a number of years, but it is always buried deep within the Social Security and Medicare trustees’ annual reports.

Your methods for evaluating these gargantuan numbers are not necessarily incorrect, but could be improved upon. Rather than compare the 75-year entitlement imbalances of $40.6 trillion with items such as annual gross domestic product, household net worth, and so on, it would be better to compare them with the sum total of resources from which they would be paid. A standard metric is the present value of future GDP. However, as public trustee, Thomas Saving is fond of saying: “The government does not own the GDP.” It has never, and won’t in the future, subject all of national output to taxes. That means the imbalances are best compared with a revenue base such as future payrolls. The present value over the next 75 years of future payrolls is estimated by the Medicare trustees to equal $335.3 trillion. That yields a “policy metric” for evaluating the size of the federal entitlement imbalance: Future payroll taxes would have to be increased by another 12.1 percentage points ($40.6 trillion divided by $335.3 trillion equals 0.121, or 12.1 percent) immediately and permanently in order to avoid cutting entitlement and all other federal spending and to avoid additional debt creation. That’s almost a doubling of all payroll taxes to fix the problem through the next 75 years. It bears repeating, however, that more than one-half of total entitlement imbalances (of $90 trillion) are projected to arise after the next 75 years.

The longer we wait to rectify federal fiscal imbalances, the larger would the required percentage point increase in payroll taxes have to become to balance the government’s projected revenues with its spending trajectory and expenditures under present laws. Contrast the urgency of such a fiscal scenario with the current crop of politicians running for president all of whom have so far been deafeningly silent on these issues. Would we, should we, and could we increase taxes to such an extent to deal with our entitlement overstretch?

Only at our peril under today’s environment of intense tax competition. And, in any case, the increased revenues are unlikely to be saved by the federal government for paying future entitlement benefits. That means the only sensible course would be is to reduce federal spending, especially on entitlements.


Senior Fellow

Cato Institute


The high cost of baloney

Politicians seem to have a knack for suddenly finding religion, admitting “sin” and acknowledging personal responsibility for their actions once their misdeeds become public knowledge. Sen. David Vitter, Louisiana Republican, exemplified this phenomenon regarding his interaction with the “D.C. Madam’s” escort service when he apologized for “a very serious sin in my past for which I am, of course, completely responsible” (“Sen. Vitter apologizes for link to ‘D.C. Madam,’” Nation, Tuesday).

Yes, of course, Mr. Vitter is responsible because, after all, he is the one who made the initial choice to engage the service and, apparently, it is something he wanted to do. What he likely did not want is for his clandestine behavior to be leaked to the press much less anyone else and have his family and the world find out about it.

Now that the word is out, however, he is making a politically correct effort to be contrite. He claims he has asked forgiveness from God and his wife and has made amends through religion and counseling. He chooses not to elaborate and relate any details of his miscreant actions.

Story Continues →