A little less than two years ago, Newsweek
ran a cover story that used the University’s student body to
examine how our generation responded to Sept. 11. Apparently,
before the attacks “careers were their major concern both during
the high-tech boom (how to cash in) and after (how to get a job).”
But then, we are told, everything changed. “They once dreamed of
earning huge bonuses on Wall Street, they’re now thinking of
working for the government, maybe joining the FBI or the CIA.” The
return of the prodigal generation.
- Mira Levitan
Two years later, this interpretation of our generation’s place
in history appears suspect. Actually, it’s pure rubbish. A terrible
tragedy? Of course. An epoch-defining moment? No. Our “defining
moment,” which the hyperbolic prose of Newsweek identified as Sept.
11, has yet to occur. But it’s not difficult to imagine what it
will be and what it will look like.
For our generation, there’s one thing, and only one thing, that
matters: In 2008, the Baby Boomers will start retiring and
collecting Social Security and Medicare benefits. The end of the
Baby Boomers’ stay in the labor force will set in motion a series
of events that will determine our economic destiny.
Two factors have conspired to shape this gloomy future. The
first is demographic. The Congressional Budget Office estimates
that the 65-and-older population will double by 2030, and, as a
result, the segment of the population of working age will decrease
by 15 percent. With a lower proportion of the population in the
work force supporting a glut of retirees, our generation tax rates
will rise or our parents’ benefits will fall precipitously. The
other factor is inflationary. Healthcare costs will continue their
historic growth and Social Security benefits, tied to the cost of
living, will rise as well. This picture is grisly. The CBO
forecasts that government spending on Medicare, Medicaid and Social
Security will mushroom to 14 percent of gross domestic product in
2030, 17 percent in 2050 and an unfathomable 21 percent in
2075.
The United States now has a deficit in the neighborhood of $450
billion. Government projections show the deficit disappearing
toward the beginning of the next decade. But if Congress makes the
Bush tax cuts permanent, the outlook changes to permanent deficits.
Add in a Medicare prescription drug benefit, slated to cost $400
billion over the next 10 years and grow rapidly once the Boomers
retire, reform of the Alternative Minimum Tax, which will tack on
another $600 billion to the deficit, and massive defense outlays
for the foreseeable future and you have a crisis of the highest
order.
Given this messy outlook, members of our generation have
adjusted their expectations. We assume Social Security will be
kaput within 50 years. You simply cannot find a twentysomething who
thinks they’ll get a nice return from their tax payments to these
programs. The fate of these entitlements and the struggle between
our generation and our parents will determine the dimension of
political conflict in this country for many years to come.
Former Vermont Gov. Howard Dean’s recent scrapping with fellow
presidential aspirant Dick Gephardt of Missouri is an intriguing
case of the coming conflict over the future of entitlements.
Gephardt set up a cheesy website, DeanFacts.com, slamming Dean as a
sworn enemy of Medicare and Social Security. Some of Gephardt’s
criticisms stretch the limits of credibility, but there is more
than a kernel of truth to Gephardt’s attacks. During Dean’s tenure
as a sacred-cow-slaying Democratic governor with a reputation for
fiscal conservatism, he pursued policies that would appear to be
anathema to the diehard liberals now driving his campaign.
During the congressional budget showdown in 1995 Dean supported
excising over $250 billion from Medicare’s budget. Ten or 20 years
ago Dean’s Medicare history would never fly, but the key difference
now is that Dean’s supporters are young. Dean’s rabid opposition to
the U.S. intervention in Iraq may partially explain his support
among the party’s liberal ranks, but our generation’s ambivalence
toward retirement benefits. For our generation, Medicare and Social
Security are viewed as obscure curiosities, they are not essential
programs that our livelihoods will depend upon. In the past,
Gephardt could have siphoned off support from Dean’s liberal flank
with his Medicare tactic, but now the strategy poses the risk of
alienating potential youth supporters.
Peskowitz can be reached at
“mailto:zpeskowi@umich.edu”>zpeskowi@umich.edu.