Opinion: Entitlements loom as economy chugs along
The economy added 213,000 jobs last month, a robust measure of growth. Some 600,000 people started actively seeking jobs, a signal of workforce optimism. Construction spending is up, unemployment claims are down. Despite worries about a trade war, things are good. And so isn’t this a good time to think about addressing the economic crisis that, in the euphoria of today’s boom, dares not speak its name?
Its name, of course, is the entitlements crisis, and the threat that Social Security and Medicare spending in the future has the potential of wreaking far more havoc on the economy than the tariffs on China, Canada and Mexico—themselves no small factor in the economic calculus.
The United States Chamber of Commerce, no alarmist organization, terms entitlements the ‘’slow-motion crisis,’’ and in fact this crisis has been building for a generation. Congress shored up Social Security in 1983, when two sages — both graduates of New York City public schools who went on to earn doctorates, one who in his youth worked as a longshoreman, the other who as a young man played clarinet in the Woody Herman band — sought to open the country’s eyes to an accounting problem that was really a political problem.
The late Sen. Daniel Patrick Moynihan of New York and former Federal Reserve chairman Alan Greenspan cobbled together a compromise that salvaged America’s favorite welfare plan for 35 years, about four or maybe five times longer than the planned obsolescence of the automobiles produced by the industrial lineal descendants of Alfred P. Sloan Jr., the General Motors chief who didn’t invent the notion but who popularized it nearly a century ago.
So now the crisis summons us again, and we should not be surprised. Six years before Messrs. Greenspan, a Republican, and Moynihan, a Democrat, released the Social Security overhaul that they thought would provide the $168.7 billion required to assure the system’s survival, President Jimmy Carter summoned two dozen members of Congress to the Indian Treaty Room of the White House. There, poor man, he signed a Social Security measure that he said would guarantee ‘’that from 1980 through 2030, the Social Security System will be sound.’’
So much for wishful White House thinking.
We are a dozen years from the year 2030, and two major efforts to redeem Mr. Carter’s promise have failed to restore financial soundness to an old-age benefits program that dates to Franklin Delano Roosevelt, that has been a sturdy part of American retirement planning for more than eight decades, and that today provides benefits to 57 million people, nearly a fifth of all Americans.
‘’This crisis is substantively more urgent than ever but politically it doesn’t seem to be urgent at all—a reflection of the disconnect between politics and reality in Washington today,’’ said former Sen. Judd Gregg of New Hampshire, a onetime GOP Budget Committee chairman. ‘’We are looking at almost unlimited deficits, with new pressure from entitlements. The bills keep going up, the debt keeps going up, and we are looking more and more like Greece.’’
The source of the latest crisis: Baby Boomers, those born between 1946 and 1964 and who are retiring in great numbers, causing great strains on Social Security and, as they pass age 65, Medicare. (The Social Security retirement age, once 65, was moved in 1983 to 66 years and two months for those born in 1955, rising to 67 for those born in 1960 or later.)
A generation ago there were 19 adults for every 100 Americans between 18 and 64. But now, according to new Census figures, there are 25 adults at age 65 for every 100 in the generalworking population, rising to 35 in only a dozen years. About 10,000 Americans turn 65 each day, and their benefits are supported by a working cohort comprised of people born at a time of smaller birth rates. Plus this: Fewer babies were born last year than in any year in the last three decades.
Do the math. It is not pretty.
The political calculation isn’t pretty either. President Donald J. Trump has said he doesn’t want to make adjustments in benefits, which isn’t any more irresponsible than the view of many of his predecessors and most congressional lawmakers, who know a losing issue when they see one. The solution requires higher taxes, or increases in the retirement age, not exactly popular positions. Of course the whole problem might be wrestled under control simply by raising the maximum taxable earnings, which this year is $128,400, or by eliminating the cap altogether, but you can imagine the lobbying effort by well-heeled Americans that would be set loose the moment that trial balloon floats upward.
Then again, Congress could reduce benefits. That would mobilize millions and produce the sense of national unity so absent from today’s America—but would only add to the sense of rage that is so prominent in the country today.
But now that Social Security costs will exceed the system’s income this year for the first time in history—three years earlier than expected—perhaps Washington will pay attention. House Speaker Paul Ryan has railed about this issue for years, but he is retiring, in part because nobody listens to him on any subject, especially this one. The Medicare crisis is separate but related; the threat there comes not only from the ratio of workers paying into the system against retirees drawing from the system but also from growing health-care costs and increased life expectancy.
The warning from Thomas J. Donahue, the head of the Chamber of Commerce is stark:
‘’Congress has known about this looking crisis for decades, and it has ignored it for just as long. the situation is quickly growing too serious to ignore. The U.S. Chamber of Commerce is blowing the whistle, and we’re ready to work with lawmakers on sensible reforms. Th well-being of our most vulnerable citizens, the basic functioning of our government, and the economic vitality of our country depend on finding a solution before the clock runs out.’’
But that clock is ticking. ‘’This situation can’t last forever and some day we will have to pay the piper,’’ said Mr. Gregg, ‘’and that will mean significant reduction in the standard of living of most Americans, especially those under 40.’’ If logic prevails, they will be the next angry Americans. We should welcome their anger.
David Shribman is executive editor of the Pittsburgh Post-Gazette.