So the debt-ceiling debacle is finally over and the government has been reopened. You may think that it’s just the end of one battle in the 30 years war between Democrats and Republicans and you are certainly correct. However, at least that war is being fought in the open for everyone to see. The more covert war, the one that is only discernible to the cognoscente, is the war being waged by the elderly against the younger generation.
Last Tuesday the venerable Ben (of Jones and B) asked me what I thought of this video. In response, I raved and raged about how the Federal debt was bullshit and that the Republicans are screwing up the country. By Thursday I thought about it some more and had to admit that, yes, a $17 trillion debt is a problem. However, take a quick look at exactly what we are spending that money on. In 2009, 20 percent of Federal spending was on Social Security, 18% was spent on Defense, and another 13% was spent on Medicare. Since then, however, defense spending has been competely decimated by the end of the war in Iraq, the gradual withdrawal from Afghanistan, and, most importantly, the sequester. By next year it will be less than 14% of overall spending. Social Security and Medicare, on the other hand, have been left entirely untouched. Now, as a good Democrat I should be happy about this. On the other hand, as a good Millenial, I am completely terrified.
I never thought that I would write this, but Rick Perry is right. Social Security really is a Ponzi scheme and like all Ponzi schemes it works pretty well until it suddenly and epicly collapses. Basically, as long as there are enough younger workers contributing to the Social Security pot, everything goes well. But take a look at these birthrates between 1945 and 1980. I bet that you knew that there were many Baby Boomers but, until looking at this graph, you didn’t know just how many and, more importantly, how few Generation Xers there are. Those first Boomers, born in 1946, 47, and 48 started collecting Medicare and Social Security last year, but there were substantially more kids born per year in the 1950s and early 60s than there were in the late 1940s. Those hapless people, now in their late 50s, were absolutely pummeled by the Great Recession and can’t wait to start getting those Social Security and Medicare checks. And we know what happens when Ponzi schemes collapse. It would not be so bad if life expectancy was 61.0 for men and 63.5 for women (as it was in 1932 when Social Security was created) or even 66.8 for men and 73.7 for women (as was the case in 1965 when Medicare was passed). However, with life expectancy being closer to 80 we can expect the Baby Boomers to live a very nice retirement while the US keeps borrowing money to pay for the old foggies.
I am not the only one writing about this problem. Here is Time Magazine’s Joe Klein’s take and here is Thomas Friedman of the New York Times. Best of all, however, is Billionaire Stanley Druckenmiller who has been barnstorming the country to raise awareness about the fact that the old are stealing from the young. Watch his presentation at NYU to get the full scope of the problem.
What is to be done? Well, fortunately, there is broad agreement that the cuts impossed on discretionary spending by the Sequester should be replaced by a combination of cuts to Social Security and Medicare and by raising new taxes through cutting loopholes. Better still, the recent agreement to re-open the government and push back the debt limit also created a debt-reduction committee, headed by Paul Ryan and Patty Murray, that is tasked exclusively with finding ways to replace the Sequester cuts. The problem, as always, is that Republicans adamantly refuse to raise taxes while Democrats refuse to cut “entitlements” without taxes being raised. Unstoppable force, meet immovable object.