- The Washington Times - Sunday, August 15, 2004

Cassandra was a figure in Greek mythology who was given the gift of prophecy but cursed by never being believed, though her predictions were always correct.

The closest we have to a living Cassandra is financier Peter Peterson, who has been warning for decades of an impending fiscal calamity from unchecked entitlement spending. His latest book on the subject, “Running on Empty,” has just been published.

Mr. Peterson notes our long-term fiscal situation was dire even before the Bush administration took office. It is a fantasy to think we could have preserved budget surpluses if only Republicans hadn’t cut taxes, engaged in an unnecessary war or increased Medicare benefits. These things have all worsened our fiscal situation, in Mr. Peterson’s view, but even taken together they represent a small part of a much larger problem.

That larger problem is essentially demographic, coupled with poorly designed entitlement programs. So long as we had a relatively young and growing population, the burden of paying for entitlements like Social Security and Medicare was manageable. But with the aging of the giant Baby Boom generation and a labor force that is growing much more slowly, all of a sudden the day of reckoning is within sight.

The first Baby Boomer will be eligible for early retirement at age 62 in just four years. If members of that generation take early retirement in the same percentages as the current generation of retirees, almost 60 percent are going to start drawing Social Security benefits the minute they can.

Thus we will simultaneously see a sharp reduction in the labor force and an increase in government spending that must be paid for by a shrinking pool of workers.

Not only is this bad for taxpayers, it is bad for retirees. Boomers retiring early will get 30 percent lower Social Security benefits for life than they would get if they only waited until age 66. Moreover, if they try to work after early retirement, they will lose $1 in benefits for every $2 they earn above $11,640. Those above age 66 can earn as much as they want and lose no Social Security benefits.

As Mr. Peterson notes, most Baby Boomers don’t have enough saved for a comfortable retirement even if they wait for full Social Security benefits at age 66. This is especially so given the rapid increase in life expectancy. If more than half of Baby Boomers foolishly condemn themselves to 30 percent less benefits, many will find themselves impoverished by their 70s.

And yet, despite the problems of the Social Security program, it is in relatively good shape compared to Medicare. That program was already trillions of dollars in the hole before President Bush and a Republican Congress stupidly expanded it by adding a massive unfunded drug benefit.

Mr. Peterson correctly argues that those elderly genuinely suffering from the high cost of prescription drugs could have been covered by a program costing a fraction of the one enacted. Instead, Republicans enacted a program covering even those who already had drug coverage from insurance or employers. This was done, as Mr. Peterson puts it, “for the express political purpose of maximizing the number of seniors who take advantage of it.”

Republicans thought they had outfoxed the Democrats for once but instead outfoxed themselves. According to new poll from the Kaiser Family Foundation, 47 percent of the elderly have an unfavorable impression of the new drug benefit, and only 26 percent have a positive one. Of those who say the legislation will affect their votes in November, John Kerry is supported by better than a 2-to-1 margin. In terms of votes for Congress, Democrats are supported over Republicans almost a 3-to-1.

So in return for selling their souls, Republicans got less than nothing in return. If every Republican who voted for this monstrosity is defeated for re-election, they will only get what they deserve.

Getting back to Mr. Peterson, I think he is too pessimistic in one respect. I think Baby Boomers will not retire to the golf course the way their parents did. A new survey from the University of Michigan finds a high percentage of Boomers expect to be working full time after age 65. For example, among college-educated men, 43.7 percent expect to keep working, up from 33 percent in 1992. Every demographic group showed a significant increase in their intention to continue working well after the traditional retirement age.

Even if Boomers keep working, however, we still have a fiscal problem that needs urgent attention. It would be better to do someething before a financial crisis forces action. But I am not optimistic that will happen.

Bruce Bartlett is senior fellow with the National Center for Policy Analysis and a nationally syndicated columnist.

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