George W. Bush’s recent speech on Social Security (mildly courageous) and Al Gore’s quick response (aggressively self-serving) provide a discouraging commentary on the state of political discourse. Few issues are as important as America’s inevitable aging–the passing of the massive Baby-Boom generation into retirement. Yet, politicians cannot discuss this subject in plain language that advances public understanding or contributes to constructive policies.
In his speech, Bush suggested that younger workers (he didn’t say how young) be allowed to invest part of their Social Security taxes in private accounts of stocks, bonds and mutual funds. This is not a nutty idea–some prominent Democrats have championed it–though it does raise many practical and philosophical questions. But Gore dismissed it as a nutty idea and roared: “We will reform Social Security the right way. We won’t raise the retirement age.”
It is hard to imagine a more irresponsible promise. No one thinking about the nation’s future could, in good conscience, simply dismiss higher retirement ages. It is one obvious way of coping with aging. The problem we face is not a Social Security problem or a Medicare problem. It is the collective pressure that all government retirement programs place on the young, other government spending and taxes.
More and more retirees will be supported by relatively fewer workers. Between 1998 and 2025, the over-65 population will increase by about 85 percent and the labor force will grow about 20 percent, according to the Bureau of Labor Statistics. Already, those under 65 provide about half the total income–including health care–of those over 65, estimates economist Victor Fuchs of Stanford University.
As important, retirees are increasingly healthy and able-bodied. Longer life expectancy, better health and earlier retirement mean Social Security and Medicare now cover many people who are effectively middle-aged, argue Eugene Steuerle and Christopher Spiro of the Urban Institute.
What should be said plainly is that retirement ages ought to be raised gradually and federal benefits for retirees should be made somewhat less generous, especially for the well-to-do. Otherwise, the costs of Social Security, Medicare and Medicaid (which covers some nursing-home care) will become crushing. They will threaten higher taxes or lower spending on other federal programs–everything from defense to the environment. In 1998, these programs already represented 45 percent of federal spending (excluding interest payments), reports the Congressional Budget Office. By 2030, their share could rise to 65 percent.
Even if these costs were easily affordable, they are increasingly socially unjust. Many poorer and younger workers are supporting richer retirees. The generational contract needs to be rewritten to reflect advances in health and well-being. The retirement age should go to 68 or perhaps 70. Some older Americans would extend careers; some would start second careers; some would take part-time or part-year jobs.
Of course, few practical politicians even whisper these ideas. Gore has now gone further. His categorical rejection of higher eligibility ages would eliminate a desirable shift in federal retirement programs. His policy–following Clinton’s–is equal parts demagoguery and denial.
Their pitch is to “save” Social Security by extending the solvency of the Social Security trust fund. This is done by placing more U.S. Treasury securities in the trust fund. As an accounting device, this raises the trust fund’s “surplus.” But the approach is a sham. When Social Security cashes in its securities, the Treasury can pay in only three ways: higher taxes, cuts in other federal programs or changes in federal borrowing (meaning a lower surplus or higher deficit). The central conflicts remain.
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Gore is playing an old Democratic game: to portray all suggestions to alter Social Security and Medicare–except to expand benefits–as wicked attacks on the elderly. These denunciations stifle even modest political candor. The targets of the attacks defend themselves by denying they want to annihilate America’s grandparents.
Candidate Bush may or may not break this pattern. Certainly, his proposal–by itself–is no panacea. The amounts that younger workers invested would, inevitably, reduce the amounts available for paying currently promised benefits. How would he deal with this? How would new investment accounts affect the stock market? Bush proposes a bipartisan commission to consider the hard questions. The virtue of his plan is that a commission would raise the larger subject of retirement policy (including health care) and help forge a political consensus. The vice of Gore’s shrill response is to foreclose this process.
In the long run, Americans need to work longer and pay for more of their own retirement. Almost everyone wants to ignore the pressures for higher taxes or lower benefits. But the pressures will mount, risking abrupt and unfair changes. The logical outcome–sometime in the future–is to assail the young, assail the old or, maybe, assail them both.