I periodically explain why and how to fix entitlements.
Here’s my latest attempt, as part of a conversation with David McIntosh of the Club for Growth.
A few months ago, I shared some alarming CBO data about the ever-growing burden of government.
But rather than regurgitate that data, let’s look at the most-recent Financial Report of the United States Government, published each year by the Treasury Department.
There are dozens of tables and graphs in the report, but this excerpt from the executive summary captures the magnitude of America’s fiscal challenge.
At the risk of understatement, $79 trillion is a lot of money.
That number should be scary, but it’s probably not scary enough, because “PV” refers to “present value.”
So what the report is really saying is that we would need to set aside an extra $79 trillion of revenue today to cover the entitlement promises of politicians over the next 75 years.
And that’s far more than twice the size of the entire economy.
This is why I keep pointing out there we face an unavoidable choice of doing something good (entitlement reform) or doing something bad (massive tax increases).
By the way, the report also contains this table, which basically shows the cost of kicking the can down the road.
It shows that the Biden-Trump policy will increase future pain.
Do they not care because they are very old? Do they not care because of “public choice.” Do they not care because of limited cognitive ability?
I don’t know. But I know that both Trump and Biden are doing something that will cause America to become a European-style welfare state. And that won’t be good for national prosperity.
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Instead of reforming Social Security and Medicare as Dan Mitchel proposes, a better approach is to gradually increase the age at which one qualifies for benefits. For example, increase the age one qualifies for benefits for those born after 1990 by birth year – 1990 months. So someone born in 2002 would have to wait an extra 2002 – 1990 months = 12 months to qualify for benefits. Eventually no one will live long enough to collect benefits.
This is similar to the approach that Ronald Reagan took to Social Security where he was able to gradually increase the full Social Security retirement age from 65 to 67.
Dan, I’ll add this choice: Do they not care because they’re politicians?
Like Thomas Sowell said (paraphrased), “The first rule of economics is scarcity of resources. The first rule of politics is to ignore the first rule of economics.”