War is coming. This one will not be a traditional type of war. This conflict will be fought inside the borders of the United States, between foes of different birth-years armed with little more than outrage and hyperbole. The point of this war isn't land or power. The purpose of this battle is to affix blame for the mess that we call the nation's finances.
The primary battlefront will be Social Security and Medicare, because these programs collectively represent commitments that dwarf the nation's $20 trillion debt. Even on the surface, these figures beg the question: who is going to pay for all of this? Moreover, these obligations operate on an intergenerational contract that isn't actually binding.
Recently, The Atlantic published a piece that asserted that these programs are nothing more than a fraud, where "It's the grandparents stealing from the grandchildren." That assessment followed a widely acclaimed book, A Generation of Sociopaths: How the Baby Boomers Betrayed America, in which the author accused older Americans of systemically plundering the nation's economic landscape in part with their commitment to entitlements.
On the surface, it is difficult to blame the boomers for Social Security or Medicare, both of which predate the boomer's ability to vote. The last major expansion of Social Security occurred in 1971 when the oldest boomer was 25. Likewise, the structural trouble with Social Security preceded the boomers coming of age by decades. In fact, Social Security would have skidded into insolvency decades back without the baby bulge.
The problem with Social Security isn't demographics. It is politics. In 1944, A. J. Altmeyer, who headed the Social Security Board, warned Congress: "It is a mathematical certainty that the longer the present pay-roll tax rate remains in effect, the higher the future pay-roll taxes must be." (Emphasis added). Basically, his warning can be reduced to: "Hey Congress, it isn't possible to sell dollars for dimes forever."
The baby boomers were not even a consideration at the time of his testimony. No hands of the era were wringing over increasing life expectancy. Yet, before the first boomer was born, Altmeyer predicted our current situation with pinpoint accuracy. After 22 separate tax increases, the man looks like Nostradamus.
On the other side of the battle, Creators Syndicate columnist Froma Harrop would issue the boomers a pass at least on the issue of Social Security. She argues that boomers were actually the first generation to change the financial path of the program by electing a Congress responsible enough to raise taxes and reduce benefits sufficiently to accumulate a reserve that would carry the nation through the hordes of retiring boomers.
It is true that, in 1983, Congress did raise taxes and lower benefits. The problem with that narrative is that Congress focused these changes primarily on Gen-Xers and those who followed. The highest tax increases and benefit reductions went to those people who were 11 and younger in 1983. In other words, Congress reached a bipartisan agreement that our kids would pay the taxes that voters wouldn't.
Since that time, boomers have either led or significantly participated in the third-rail politics that have throttled any attempt to reform either of these programs, which are unquestionably out of control. These same people also popularized the book Get What's Yours: The Secrets to Maxing Out Your Social Security, which outlines the finer points of emptying the program at the expense of future retirees.
So how did the kid too young to vote at the time of the 1982 election fare with this legislation? He has paid the full payroll tax rate on larger portions of wages over a longer career than his predecessors. In exchange, he has to wait two additional years to collect full benefits. Today, at 50, he expects to start collecting those benefits the year in which benefits are forcibly reduced. Those benefits that he receives will be taxed at greater and greater rates over time.
I understand why said 50-year-old is ticked at his older siblings. Today, he is told by politicians that he needs to rethink his retirement plan so that we can keep the promises to those in or approaching retirement by breaking the promises made to him and everyone who is younger.
For full disclosure, I am a boomer, and fully admit that we let the beast that our parents created grow untethered. Does that make us the narcissistic, impulsive and self-absorbed villains of the 21st century? It makes us just like our parents. Like our predecessors, we simply didn't pay attention to the numbers that have been readily available since the 1940s.
In all honesty, that also makes us a lot like younger Americans, who have access to even more material on the coming crisis. Yet, not one serious question was asked of either candidate for President in the last campaign cycle about Social Security, which is arguably the most important program in the government's portfolio of spending.
We have a crisis rapidly approaching. We can bicker over who is to blame, or we can start thinking about how to deal with a disaster that is approaching with "mathematical certainty."
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Originally Posted at: https://www.moneytips.com/war-is-coming
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