John Cogan’s latest book, “The High Cost of Good Intentions” forced me to conclude that our politicians are either innumerate or cynical. They’ve ignored (or pushed off telling us) what deficit spending will mean to our children and the security of the nation.
For example, Social Security and Medicare are about to drive federal spending to unprecedented peacetime levels. If nothing is done to restrain their growth, in a dozen years taxes levied on all income groups will have to be increased by 50%. Middle class households will face a combined income and payroll tax rate of 45%; tax rates on capital formation will be increased to 50%; and U.S. businesses will pay a 40% tax rate on their earnings.
Furthermore, Social Security is heading to certain bankruptcy. In a dozen years, the program will be unable to pay its promised benefits. The time to act is now to slow the growth in benefits promised to future retirees. Higher taxes are not the answer. By the time there are only 2 workers for each Social Security recipient (in 10 years), the financial burden on workers will already be too high.
The solution to the fiscal challenge presented by Social Security and Medicare is to limit the growth in their future benefits per recipient to the growth in overall consumer prices and medical inflation, respectively. Achieving this straightforward policy goal will eliminate the need for sharply higher taxes.
As we edge closer to a train wreck, I find myself thinking of Harry Truman who once said, “I never did give them hell. I just told the truth, and they thought it was hell.” It’s not too late to adjust runaway entitlement programs, otherwise there soon will be “hell to pay.” We are running out of time. We need to stop electing politicians who can’t run numbers and who won’t just tell us the truth.