The Coming Entitlement Crisis
In February of last year, conservative commentator George Will gave a great lecture at the Navy War College in Rhode Island. In that lecture, he detailed two major battles we will face in the coming election, which are taxes and entitlement reform. Despite what the liberal media says about conservatives, we are not trying to destroy Medicare. We are trying to salvage it. It’s the same for Social Security. The math simply doesn’t work anymore. People are living longer through the advancements in medicine. This is a good thing, but it is also incredibly expensive.
When Social Security was instituted, the average length of time from retirement to death was two years. That is no longer true. The fastest growing demographic in the U.S. is the very elderly who are people aged 85 or older. Furthermore, baby-boomers are retiring in droves at a rate of 10,000 a day, every day for the next two decades. This is causing unbearable tension on the already stressed Medicare and Social Security payrolls.
By 2025, there will be a paltry two workers per retiree versus the fourteen workers per retiree in 1950.
The retirement age will have to go up and keep going up in increments to ensure solvency. We will have to discuss the possibility of creating private retirement accounts to decrease the burden on the system. The introduction of choice and subsequent competition are usually effective in reducing costs. The Heritage Foundation has also released policy prescriptions for Medicare that suggests, amongst many things, raising the eligibility age to sixty-eight. The premium support that is outlined in Congressman Paul Ryan’s Path to Prosperity is essential. It injects choice, personal responsibility, and fiscal discipline into a rigid system that incentivizes waste. In short, recipients receive a voucher to buy a plan that fits their critical needs. It is not a wasteful one size fits all approach. With this, Americans have more of a stake in how their money is spent on their insurance and reestablishes discipline and responsibility. This is not an alien concept. During the Kennedy Administration, the average recipient paid forty-seven cents for every dollar of Medicare spending. Medicare, of all entitlements, is the one that needs priority attention since it carries $37 trillion dollars in unfunded liabilities, which will fiscally destroy us if it is not dealt with soon.
Now, Grandma and Grandpa will fight hard to keep their welfare state intact. They vote more often than the younger generation and will oust any politician who seeks to make these critical changes. Democrats will try to co-opt seniors, since admitting Medicare as an insolvent program invalidates their liberal ideology, and paint Republicans as heartless. However, the “gravy train” is over. It may have been great for our parents’ parents, but it has become a gross transfer of wealth from the young to the elderly, which in the end leaves almost nothing for succeeding generations.
In fact, Treasury Secretary Timothy Geithner stated that Social Security is solvent for only another 20 years. After which, full benefits payouts to recipients will not be possible. Moreover, the Trustees Report also included the insolvency of Medicare that will be unable to cover seniors’ hospital bills by 2024, which is three years earlier than what was projected last year.
George Will asks, succinctly, how much wealth are we willing to spend subsidizing the last twenty-five years of American life. That is a tough question, but with new fiscally disciplined and conservative Republicans in the House, under the leadership of Congressman Ryan, we have a solution. We are still waiting on President Obama’s proposals to seriously deal with this fiscal disaster. So far, none have materialized. In the meantime, America’s young and vibrant workers are at risk of becoming trapped in a gerontocracy.