Editor's Note: I am publishing a multi-part series focused on Baby Boomers and social insurance, the frequently maligned and misunderstood federal entitlement programs. This series delineates arguments, pro and con, concerning the fiscal impact of population aging and social insurance. Can we expect secure and sustainable Social Security and Medicare programs? Can our children and grandchildren? Please bookmark this blog and return periodically for subsequent installments. Weigh in with your opinions in the comments section. If you haven't already, read Part 1 in the series first.
MAKING OF A BOOMER CULTURE IN AGING
Expecting Baby Boomers in their aging to do what they’ve always done — transform fundamentals of society and commerce — is only half the equation. We must adapt the Western experience to a rapidly aging population — societies where old citizens outnumber young.
Laura L. Carstensen, PhD, Director of the Stanford Center on Longevity, has recognized what will be needed and issued a challenge. “Myths and gaps in our culture’s understanding of older people, as well as widespread misconceptions about old age, further hinder the flowering of a culture in which people age well.”
Myths and gaps in our cultural understanding of the vast potential embedded in a soon-to-be-dominant aging generation — Baby Boomers — further inhibit society’s capacity to transform an aging problem into one of history’s greatest opportunities for psychological, cultural, technological, and scientific advancement.
“What we have to do today,” adds Carstensen, “is re-engineer society so that it supports satisfying, independent and healthy lives for older people.”
Fundamental to re-engineering society is firing retirement, which Carstensen views as a 20th century invention. Critical to changing our conceptions about work after 65 is the extent to which we can modify social attitudes about the value of older workers, while changing regressive taxes and retirement laws and transforming how professions address participation by older workers.
Yes, changes may be needed to entitlement programs conceived in another era. But along with changes to the basic conceptions of social insurance must also come fundamental changes to the nation’s overall health-care system; new social norms for healthy and productive aging; appreciation of the contributions possible from an empowered and motivated population of wise elders; and an economic system that values aging workers, making meaningful jobs available throughout the lifespan — for so long as Boomers can and want to keep working.
If we can (and we must) achieve a redefinition of aging in society, we can dramatically reduce the potential fiscal impact of aging. Social insurance programs can persist as envisioned, updated to meet needs of a new generation intent on reframing aging.
Many experts agree that when Boomers work just a few more years beyond 62, they can substantially improve their own retirement prospects while improving fiscal soundness of Social Security.
But we cannot lose sight of the care and compassion compelled by these programs, nor can we forget that those who ultimately qualify to receive social insurance have paid their dues over many decades, committed to these promises with every paycheck.
With foundational social insurance granted by Social Security and Medicare — assurance that poverty and untreated chronic illnesses in old age are not inevitable — Boomers can be inspired to transform their lives from success to significance. This generation has the will, the means, and ultimately the technologies available to empower rather than imprison aging nations.
This is already happening if you look for signposts.
THE ENTITLEMENT PROBLEM
Next time you fill up your car with gasoline, ask the young attendant if he or she expects to receive Social Security benefits in the distant future, perhaps 30 or 40 years from now.
Typically the answer will be no. Anti-entitlement critics have already done their job. They’ve co-opted media so successfully for the last two decades that most young people today believe critics' prognostications of imminent entitlement funding collapse.
News media have joined entitlement critics’ propaganda machine, sometimes forsaking journalistic balance while printing shocking, unsubstantiated, and misleading articles designed to provoke fear and anger among readers.
So critics warn us: In 2007, Medicare began paying more in benefits than the program received in income through payroll deductions. Social Security will take in less than it pays in 2017.
The nation’s “unfunded liabilities” — money needed by the federal government to pay for all its promises to retirees, federal employees, military families and disadvantaged groups — will reach a mind-boggling $211 trillion by mid-century, according to authors Laurence Kotlikoff and Scott Burns in their shocking book, The Clash of Generations: Saving Ourselves, Our Kids, and Our Economy.
Keep in mind that the nation’s gross domestic product (GDP) in 2013 was estimated at $16.8 trillion. Thus, assuming no growth or contraction in the GDP a few decades from now, it would take 12.5 years of income derived from all goods and services produced and sold by all the companies and individuals in the US simply to pay for promises made to retirees and other dependents through the end of this century.
Those who are preaching economic hell and damnation are perhaps at heart well-meaning citizens committed to their beliefs. But their beliefs are just that: unproved predictions about the future. The depth of their commitment and all implied values that swirl around their numbers — the zealotry embedded in their messages — makes their anti-entitlement crusade an ideology – an ism. Call it anti-entitlementism.
They are asking Americans to suspend disbelief that mortals can truly predict the future with accuracy, especially 40 years into the future ... and especially predictions made by economists with an agenda.
Steven Mihm, an assistant professor of economic history at the University of Georgia, proposes an interesting observation about predictions made by economists:
“Recessions are signal events in any modern economy. And yet remarkably, the profession of economics is quite bad at predicting them. A recent study looked at 'consensus forecasts' (the predictions of large groups of economists) that were made in advance of 60 different national recessions that hit around the world in the '90s: in 97 percent of the cases, the study found, the economists failed to predict the coming contraction a year in advance. On those rare occasions when economists did successfully predict recessions, they significantly underestimated the severity of the downturns. Worse, many of the economists failed to anticipate recessions that occurred as soon as two months later.”
If economists have been woefully inadequate at predicting recessions just a few months before they strike, how much credence should the public place in their predictions for 30, 40, or 50 years from now?
Warren Buffet, the third richest man in the world with a personal wealth of $67.5 billion, believes in the growth potential of the US economy. He forcefully contradicts those who think pessimistically about the impact of social insurance on the overall economy.
“We’ve made certain promises that promise away a portion of the pie,” he said. “But the wonderful thing is that the pie gets larger. Even if one percent per year real productivity growth per capita, we double the GDP in per capita in real terms in 75 years when the Social Security projections go up. So even though seniors may get more of the pie, the pie will grow enough so that everybody will get more of the pie.”
In The Clash of Generations, for example, authors Kotlikoff and Burns predict that the US GDP in 2030 will be $23.08 trillion. They further predict that the combined cost of Social Security, Medicare, and Medicaid will be $3 trillion, or a hefty 13 percent of GDP. However, the respected Centre for Economics and Business Research: World Economic League proposes that the US economy will produce a more robust $33.15 trillion GDP in 2030. The social insurance programs will then be 9.05% of GDP, a much more manageable scenario in line with Buffet’s optimism.
Yet, those who feel they have the clearest view of an economically disastrous future have been gaining traction in recent years. The list of entitlement doomsayers is growing as the Baby Boomer Generation teeters perilously into the years when their members have become eligible for these benefits. The short list includes the Cato Institute, the Concord Coalition, the Peter G. Peterson Foundation, and Americans for Generational Equity.
PROPAGANDA IN ACTION
Entitlement critics have been disseminating their propaganda forewarning catastrophe since the 1980’s.
Peter G. Peterson, former chairman of the Blackstone Group and founder of a foundation under his own name, wrote a provocative book entitled Gray Dawn. Even the book title reveals his sentiments. An aging population is, indeed, a gray prospect, literally and metaphorically.
He writes, “If we do not reform tax and spending policies, the benefit outlays for just five programs — Social Security, Medicare, Medicaid and federal civilian and military pensions — will exceed total federal revenues by 2030. This would leave zero tax revenue for any other purpose — not even for interest payments, nor for national defense, nor for education, nor for child health, nor for the federal payroll.”
One way Peterson and his allies have been successful in shaping public opinion over three decades is to amalgamate Social Security and Medicare into one unified concept. Although these two programs are very different and have different financial models, unifying them under the banner of “entitlements” makes both programs equally objectionable. And, of course, to be entitled to anything challenges cherished Western values such as meritocracy, individualism, and restrained governmental power.
Entitlements are anathema to truly free markets and harbor hints of socialism. With the force and reach of substantial marketing resources, as well as media too easily lured by gloom-and-doom stories about “greedy geezers,” the critics continue their agenda of co-opting media attention and reporting. They spin horrific tales of future crises; media lap it up, relishing these headline-winning ominous tones of future calamity and intergenerational inequity.
Charles Schwab, the securities brokerage and financial services company, conducted a nationwide survey of all major generations: Generation Y (ages 19 to 34), Generation X (ages 35 to 49), Baby Boomers (ages 50 to 68), and the Silent Generation (ages 69 to 89).
The most disconcerting finding in this survey of 3,866 Americans is that only 15 percent of Americans are optimistic about the future of Social Security; 60 percent are fearful of the program's long-term viability. More than two-thirds of the survey group believes that the Social Security program needs a “significant overhaul.” Only about one-third of the survey group believes the program can be “fixed with some relatively minor changes.”
Now a reality check: Few, if any, of those surveyed have hands-on experience with nuances and machinations of the Social Security program. The program is too complex and inaccessible for lay scrutiny. Perceptions concerning inevitable insolvency of this program have been shaped by media reports; often these news articles reflect manipulation of public perceptions by foundations, think tanks, associations, and private companies interested in overhauling Social Security, with privatization being a nearly universal goal.
As I have written, social insurance critics have done their job.
NEXT: ARGUMENTS AGAINST AND FOR FEDERAL SOCIAL INSURANCE PROGRAMS
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