Stuck With the Tab

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In high school our honor society took educational trips to the San Francisco Bay area. We visited universities and went to museums. One year about a dozen of us went to dinner at a famous and relatively expensive restaurant. When the time came to pay the check (we didn’t realize we could have asked for separate checks), we found that none of us had figured in tips, tax or beverages, so we came up seriously short. We started passing an emptied bread basket around and around the table trying to raise enough money. As the passing became more desperate, my friend Bruce predicted, “We are going to have to do dishes all night!”

Our buddy Mary wisely suggested that to solve the problem, we ought to get individual checks – next time. So far, so good. But now imagine if Mary had said, “I have a great solution. Anyone who promises to pay for his own check next year doesn’t have to put any more money into the basket now.” If she had said such a dumb thing we would have stuck her with the bill and walked out, and rightly so. Her”solution” would have made matters worse. But Mary wouldn’t have said such a thing, because she was smart. She would never have con- fused a strategy for avoiding a problem in the future with a solution to an immediate crisis.

There is a similar crisis on the national level. Social Security and Medicare for us baby boomers are going to cost more than the United States is collecting in FICA taxes. We won’t have enough money to pay the bill. Yet libertarians continually argue, and President Bush went along with it, for a “solution” that is exactly like that hypothetical solution to the problem of the restaurant tab. We go out and say, “Let’s solve the entitlement funding crisis by letting people opt out of Social Security and Medicare taxes and put their money into their own retirement savings.”

Of course, letting people provide for their own retirement and medical insurance could have prevented the problem if we had started doing it 50 or 60 years ago. But for the past 30 years or so we’ve been solving the entitlement funding problem by bringing more people into the system so we will have enough income to pay the bills. Every person we now allow to opt out of the paying-in part of the system will make the problem worse. That should be obvious to everyone. The more we rant and rave about the huge unfunded mandates we face in the coming decades, the stupider our”solution” sounds to the average person.

Solving the entitlement funding crisis is very much like solving the problem of too much personal debt. When people have been spending more than they are taking in they have to cut back on their spending and live within their means. That’s hard, and no one likes doing it. But then they realize that to solve their problems, they have to cut back even further, in order to start paying off their debt. That’s a double dose of hard news, but it is unavoidable.

We should begin with a campaign of truth-telling. Social Security is not an account that you build up by working. Your Social Security account is pure fiction. Social Security is simply welfare – taking money out of the paychecks of today’s workers and giving it to older people. Once the reality is under- stood, we can begin promoting strategies to lower the burden on workers, such as means testing or delaying retirement to older ages, that would cut the costs of the Social Security and Medicare programs and get the funding into the black. Then we should offer further cuts to enable us to begin allowing the youngest earners to opt out of the program. The more we can cut costs, the more young people won’t be trapped into dependency by putting their money into the Social Security and Medicare system.

What better reason to get us baby boomers to accept means testing and delays in Social Security entitlement, than to enable our grandchildren to be free of the burden of sup- porting us? I would gladly work a few years longer and post- pone my Social Security entitlement if I thought it would let my grandchildren put 12.4% of their salary into their own retirement.

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