WASHINGTON – OK, the shutdown is over. But no one should be fooled into thinking that this settles the big questions facing the country. Even if (a big “if”) the immigration laws are overhauled and the nearly 700,000 “Dreamers” stay in the United States, at least three large issues remain that neither party has yet had the courage to confront.
Here they are.
1. How will we adapt to an aging population?
In 2000, the 65-and-over population was 12 percent of the total; now it is 15 percent, and in 20 years, it’s projected to be 21 percent – one in five Americans – reports economist Louise Sheiner of the Brookings Institution in a new paper.
Contrary to much public opinion, this aging isn’t a one-time event reflecting the graying of baby boomers. “The retirement of the baby boomers represents the beginning of a permanent transition to an older population, reflecting the fall in [birth rates] … and continued increases in life expectancy,” writes Sheiner.
Driven heavily by higher Social Security and health costs, total federal spending could rise from about 21 percent of gross domestic product (GDP) now to almost 30 percent at midcentury, projects the Congressional Budget Office. With tax revenues lagging, this implies an annual deficit of roughly $2 trillion by midcentury in today’s dollars. Government debt, the accumulation of past annual deficits, would soar.
2. How much can we – and should we – pay for national defense?
In recent weeks, the Trump administration has shifted its top military priorities from combating terrorism to deterring China and Russia. Just how much this change would cost is unclear, but it is likely to increase the need for bigger defense budgets. By contrast, the present CBO projections hold military spending to historically low post-World War II levels as a share of GDP.
That’s completely at odds with a new defense buildup. Congress seems in no rush to clarify its conflicts. “We literally still do not know if the 2018 national defense budget will be closer to $700 billion than to $600 billion,” writes Brookings defense analyst Michael O’Hanlon on his blog.
3. What kind of tax – and how large – does the country need to support older Americans and more defense?
Even if eligibility ages for Social Security and Medicare were gradually raised – and even if benefits were cut for wealthier recipients — it would be virtually impossible to shrink future budget deficits significantly without added tax revenues. The spending pressures for older people and the military are simply too great.
Inevitably, though, higher taxes would be a hard sell. Congress and President Trump have just cut income taxes; any suggestion that some or all of these cuts be reversed would be highly controversial. Similarly, a value-added tax (in effect, a national sales tax) or a stiff energy tax, often mentioned as alternatives, would presumably be enormously unpopular.
So there’s a huge political agenda awaiting debate and action. How these questions are answered will help define America’s future. But don’t hold your breath. It’s an orphan agenda, because hardly anyone wants to claim paternity. Let someone else make the needed sacrifices.
(c) 2018, The Washington Post Writers Group
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