The battle between young and old has existed forever, but never has it been so political. Previously, the lighthearted debates were of the “back in my day” or “you kids have it easy” variety. They were confined to debating the merits of current trends in music, fashion, or social mores. But today’s debate will be much more heated and consequential than whether rap music is a legitimate musical genre. That is because it is a generational battle that centers on an increasingly scarce and valuable resource—government money.
After years of willful avoidance, our nation’s long-term budget problem is finally getting the attention it deserves. Brought on by our own economic collapse, spurred by a Greece hovering near default, and re-energized by the recent deficit commission report and IMF bailout of Ireland, government debt is a worldwide problem. The question is how to solve it. After a brief period of wailing and gnashing of teeth by pundits, the recommendations by the Bowles-Simpson deficit commission have already faded into the lame-duck muck. House Speaker Nancy Pelosi provided the most straightforward assessment, calling the proposal “simply unacceptable.” She argued that,
Any final proposal from the [deficit] Commission should do what is right for our children and grandchildren’s economic security as well as for our nation’s fiscal security, and it must do what is right for our seniors.
Sadly, I am not sure Speaker Pelosi’s hypothetical proposal is possible. Doing right by our nation’s children and seniors would be a dream combination for electoral success, but is a much more difficult task in reality. The truth is our nation faces a choice. And while the recent debate has been dominated by the question of whether higher taxes or spending cuts should be the primary means of reducing our deficit, a much more fundamental question exists. It is a question of young and old. Or as Washington Post writer Robert Samuelson said, “It means asking how much we allow benefits for the old to burden the young through higher taxes, lower public services, slower economic growth and weakened national security.”
One of the primary drivers of our deficit is our aging population. This should not come as a surprise. The CBO predicted the enormous budgetary pressures that would be created by retiring baby boomers as far back as 1996 in a report entitled “Addressing the Impact of the Aging Population on the Long-Term Federal Deficit.” It warned that, [i]f the government made no changes in entitlement programs for the elderly, the forthcoming large increase in the retired population would dramatically expand federal spending.” They further argued that funding these “entitlements through borrowing is not a long-term option.”
Don’t tell that to Washington. In the 14 years since the CBO’s warning, the only reform Congress has made to our entitlement structure is enlarging it. We’re thus left with a problem that demands a political solution. But what should it look like? The menu of options is admittedly unattractive. On the one hand, if we wanted to achieve annual deficits of 2 percent per year, individual income tax rates would have to undergo a 50 percent across the board increase. On the other hand, if we wanted to maintain our entitlement structure as is, Samuelson estimates that we’d have to cut all other spending by 80 percent. Neither of these presents a realistic option for future generations. Fundamentally addressing entitlement spending has also proved politically impossible because of the inevitable backlash of seniors.
Although this debate is necessarily generational, it needn’t be antagonistic. In reality any solution will involve shared sacrifice. Every generation must understand that it has been promised more than the government can deliver. Changes such as raising the retirement age, means-testing our Medicare benefits, or transitioning government healthcare from defined benefit into defined contribution plans, would not be borne solely by the baby boomers. The sooner we change, the sooner we can all play by the same rules, without a playing field tilted in any generational direction.
The generational struggle between young and old is a small battle in a large war against our growing national debt. Only by working together can we solve our growing deficit so that we can be able to tell the next generation with complete honesty, “you kids have it easy.”