Past Generosity Creates Future Pinch

The ancient Greeks believed the greatest tragedies come when well-meaning, intelligent, caring humans cannot see the big picture or understand new circumstances. A chorus warns them of impending disaster, but they do not hear.

American public policy is ignoring a chorus of commissions and experts warning that the baby boom is turning into the “grandparents boom” with grave implications for America’s future.

America’s largest generation, the baby boomers, is being followed by a small generation. This renders unsustainable many of our most important social programs.

The tragedy is brought on not by evil people, but by well-meaning citizens living in the afterglow of the New Deal. Nobel Prize-winner Paul Samuelson observed in 1967:

“The beauty about social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in. The national product is growing at compound interest rates and can be expected to do so as far ahead as the eye cannot see. … A growing nation is the greatest Ponzi game ever contrived.”

Alas, the day of reckoning has come.

America has a growing albatross of unfunded liabilities in social programs started by well-intentioned people with the best of motivations.

However popular and “untouchable” these liabilities may be, they are unsustainable. The earlier the remedy, the less Draconian the solution.

The chorus warns us that Social Security has an unfunded liability of between $5 trillion and $6 trillion. It warns us that Medicare will not only be broke by the year 2002, but that the real problems lie shortly after 2002.

Military retirement has an unfunded liability of over $700 billion and the federal civil-service system has unfunded liabilities of over $1 trillion.

These and other promises lie like fiscal icebergs in our children’s future.

Unfunded liabilities represent money our children and grandchildren will have to pay for programs we enjoyed.

Public policy’s dirty little secret is that for all practical purposes, THERE ARE NO TRUST FUNDS.

All this money has been spent. The trust funds hold mostly IOUs.

Every dollar of those unfunded liabilities represents a dollar of spending our children and grandchildren will have to forgo. Never in history has a nation so massively pre-spent its children’s money.

Would I have voted for Social Security in 1935 and for Medicare in 1965? Yes, of course, but the challenge of avoiding public-policy tragedies is to understand when circumstances have changed.

America’s future is being put in jeopardy by well-meaning, well-motivated, myopic people.

Understanding that the Ponzi scheme has come to an end is one of the greatest challenges in America’s future. The new reality is that neither equity or social justice can be purchased by passing on the cost to the next generation.

You cannot create social justice today by charging the cost to tomorrow’s taxpayers.

The challenge of an aging society is to understand that Paul Samuelson’s Ponzi scheme has come to its inevitable end. Good public policy must fund its compassion with its own money, not its children’s.

Social justice must consider both rich-poor justice and today-tomorrow justice. However unpopular, we must do this for our kids’ sake.

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