Baby Boomers Are Ruining the Budget for Everyone

The nation needs to start asking the Baby Boom generation to pay it forward.

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Joe Klein's column this week in Time blames "our current political mess" on the Baby Boomers. He only scratches the surface.

It's really not surprising that a world run by Baby Boomers has proven to be intensely internally conflicted and paralyzed. We are increasingly trapped in the Boomers' fifty-year-old conflicts between idealism and self-absorption. For the most part, self-absorption has won.

The real question facing the country today is not public versus private, not larger or smaller, not taxes versus spending – all the things over which Washington has itself wrapped around its own axle. It's the choice between the present and the future, between the Baby Boomers and all who come after us. And, on this, both of the warring armies have long been on the same side.

In the 1980 campaign, Ronald Reagan excoriated President Jimmy Carter for federal budget deficits in the range of $75 billion; by the time President Reagan ran for re-election with heavy Boomer support, however, the deficit had nearly tripled and never shrank below $150 billion for the remainder of his presidency. Aside from a few years at the end of President Bill Clinton's tenure, these deficits never disappeared; instead, they swelled into the trillions.

[See a collection of political cartoons on the budget and deficit.]

The problem didn't stop at the piling up of debt to pay for current consumption. Just for good measure, we started cutting back on investing in the future, as well. Until then, a succession of administrations, Democratic and Republican alike, had invested in the nation's infrastructure and expanded access to higher education. But between 1967 and 2010, federal investments in infrastructure declined as a percentage of the economy, falling by more than half as a share of gross domestic product.

In 1985, we expected public university students to pay 23 percent of the cost of their educations; today, it's 47 percent. Where the maximum Pell Grant covered the entire cost of obtaining a two-year degree and 77 percent of the cost at a public university in 1980, it now covers only 62 percent of the cost of a two-year degree and 36 percent of a public four-year degree.

In fact, the entire notion of "public" came under assault – but the real target was transfers of all sorts, not just from the haves to the have-nots but also, crucially, from today to tomorrow. And this wasn't just a public sector or liberal-versus-conservative issue: America has not run a trade surplus since 1974. In the 1970s and 1980s, personal savings were 5 to 7 percent of GDP; in the decades since, they have declined to the 1 to 3 percent range.

According to a recent government report, interest on the national debt plus entitlement programs like Social Security and Medicare – all debts for our life choices that we've charged to the future – will absorb approximately 92 cents of every single dollar of federal revenue before the end of this decade. But the Republicans' answer is not really about saner fiscal choices, smaller government or even eliminating the welfare state – at least, as with St. Augustine's prayer for celibacy, "not yet." They don't plan to live with the consequences of their Spartan convictions – they expect our children to do so. They delay the real effect of entitlement cuts (except for the poorest seniors) until after most Boomers move on to that great Entitlement in the sky. Democrats offer counter-pandering about the need to preserve current entitlement programs in amber.

Neither party seriously contemplates asking the majority of today's voters to make any sacrifice for the nation's good. Each, in their own way, passes the bill on to the post-Boomer generation.

[See a collection of political cartoons on the economy.]

The nation needs a serious plan to start asking the current generation to pay forward our inheritance from the past, rather than taking everything with us to the grave (except, of course, for the bill). Here are a few modest suggestions:

First, render Social Security solvent for the duration of the Baby Boom's retirement by making the Boomers forward-fund their own retirement payments – which, of course, is how most Americans believe (erroneously) Social Security is supposed to work, anyway. To do this, we simply need to lift the cap on income subject to the payroll tax (which funds Social Security). For conservatives who abhor taxes on high-earners, just remember that if you want to migrate to a system of private retirement savings in place of at least a portion of Social Security – with which I agree (if you also provide people's preferred option of, yes, keeping their money with the government) – you need a considerable cash infusion from the current generation to forward-fund it. Eliminating the cap on taxable earned income would help do that.

[See a collection of political cartoons on Obamacare.]

Second, means-test Medicare. Converting Medicare to a voucher, as Paul Ryan famously advocates, would make it easy to means-test – but, of course, that's probably not what he had in mind. So, alternatively, we could make Medicare more like a real insurance program by picking up seniors' health care expenses, beyond some basic level of preventive care, only when they reach totals that put a strain on their budgets – a universal entitlement that, by definition, varies with income.

Third, address long-term care. Today, two-thirds of Medicaid expenditures go not for poor kids but for middle-class families struggling to care for their parents. The result: a program that doesn't meet either need particularly well. A more sensible system would see families putting aside money today to cover aging expenses down the road – this could remain voluntary (to placate conservatives), with an opt-out structure (to please liberals) and means-tested premium support (to satisfy both/neither), easily integrating with the Medicare reforms above.

Finally, Paul Ryan got one thing right: a "hard cap" that ties the rate of entitlement growth to overall economic growth. This may sound like a Republican dream come true (although it's worth noting that President Obama has proposed such a cap, as well, but his was "soft," i.e. only aspirational rather than mandatory). But it's time we were explicit with Boomers that their retirements depend upon how much we invest in the productivity of the generation behind us.

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