It won’t be pretty when old people are 39 million strong

We can’t deal with things we won’t talk about. In politics, some subjects are too unpleasant or hypothetical to encourage honest debate. Before Sept. 11, “homeland security” was ignored. Before Sept. 11, Social Security and Medicare were off-limits to candid debate–and of course they still are. The government’s recent financial reports on Social Security and Medicare once again suggest the obvious: They cannot continue indefinitely in their present form, because they will become too expensive. The reports elicited silence and complacency.

Ho hum.

On distasteful topics, we wait for crises. Perhaps we could think that terrorism would always remain a theoretical danger. But on Social Security and Medicare, self-deception is just that. We cannot conceivably avoid higher costs. Here are the numbers. In 2001, Social Security and Medicare cost about 6.7 percent of national income, or gross domestic product. By 2030, the costs are projected to rise to 11.1 percent of GDP. Government spending is now nearly 20 percent of GDP. To pay for costlier retirement programs, taxes will have to be raised, other spending cut or large deficits incurred.

By themselves, these costs might be easily bearable. Unfortunately, the projections may prove low for three reasons.

– First, there’s pressure for more spending–a Medicare drug benefit.

– Second, the figures don’t include nursing home costs, which are covered by Medicaid; its increases could add another point or two of GDP.

– Finally, people may live longer than government actuaries assume. Demographer James Vaupel thinks that by 2050 there will be 39 million Americans 85 and over. This is almost nine times today’s number (4.6 million in 2001) and more than twice the level assumed in government projections (15.4 million).

If prudent, we would prepare for this unavoidable future. We would go beyond the modest increases in Social Security’s eligibility age. People live longer and are healthier. They should work longer. Similarly, we should gradually trim (though not eliminate) benefits for the well-off. They have ample opportunity to save for retirement.

These steps would preserve Social Security and Medicare as mainstays for the elderly. But costs would not rise quite so much. That would limit the burdens on our children, tomorrow’s taxpayers. It would also minimize the dangers that high spending, taxes or deficits might cripple the economy or “crowd out” other government programs. However, we are not doing any of these things–or even candidly debating them.

Candor requires plain language. We should stop referring to Social Security and Medicare as “social insurance”–an inoffensive term–and call these programs what they are: welfare. Social Security and Medicare do not differ much from food stamps. One group of people pays taxes to improve the welfare of another. A change in vocabulary would sharpen debate and clarify choices.

Politicians’ aversion to candor is understandable, though hardly commendable. Social Security and Medicare now have roughly 40 million beneficiaries. By 2030–after most Baby Boomers have retired–the number will about double. Politicians flinch from offending. Democrats regard promoting Social Security and Medicare as a reliable standby; Republicans don’t want to be stigmatized as anti-grandma.

More surprising is the lack of candor among “opinion-makers”–many “experts,” scholars, talking heads and columnists. Liberals are into denial.

Consider this. The Brookings Institution, a Washington think tank, recently surveyed academic historians, political scientists, sociologists and economists on “government’s greatest priorities” in the next 50 years. This is a hugely Democratic and liberal constituency. Among respondents, 78 percent classified themselves as Democrats, 13 percent as Republicans and 8 percent as “independents.” Curbing Social Security and Medicare costs didn’t even make their list of priorities.

To minimize the costs of Social Security and Medicare, liberals resort to rhetorical tricks. One is to discuss the various programs separately. Social Security’s future costs, they suggest, are eminently affordable without trimming benefits. This is true. But what’s not easily affordable is the combination of Social Security, Medicare, nursing home care and new benefits–which is the reality we face.

As for conservatives, they’re more open to acknowledging the cost of an aging society. Their problem is that they claim, falsely, to have found easy ways to conquer the costs. Privatize Social Security; shift Medicare to “managed care.” These proposals are worth debating, but even if adopted, they could not magically eliminate the rising costs and hard choices of an aging society.

The central choice is this: How much of retirement’s costs will be paid by retirees and how much by their children, through taxes? We should have already begun rewriting the generational compact, but we have had a failure to communicate. We prefer to wait and hope a crisis doesn’t happen.