The University News

Issue date: 10/26/09 Section: Forum

Last week, I broke my longstanding habit of avoiding horror movies to go see "Paranormal Activity."

It was extremely scary and a great way to spend $5 this Halloween season, if you enjoy horror flicks.

However terrified you are by the film, though, you should be doubly afraid of another real life specter - the impending retirement of all the baby boomers.

"Baby boomers" is the name commonly given to the massive group of people born between the end of WWII and 1962. Many of us have parents or grandparents born in that time frame and they are all rapidly approaching retirement.

Together, they represent a fiscal tidal wave of unfunded liabilities or entitlement money promised by the government that will exceed the revenue generated by entitlement taxes (Medicare and Social Security payroll taxes).

In May the trustees of both Medicare and Social Security released their annual reports on long-term budget outlook.

What they said amounts to a much scarier and more gruesome blood-bath than anything you will see in "Paranormal Activity."

Former Treasury Department economist and current Forbes magazine contributor Bruce Bartlett said the calculations in the two reports add up to $106.4 trillion, with a "t" in unfunded liabilities.

In other words, the difference between the amount of benefits promised to current and future Social Security and Medicare recipients and the amount of revenue that will be raised by Medicare and Social Security payroll taxes is probably more than twice the total amount of private wealth in the entire country.

The total amount promised to current and future retirees by Social Security and Medicare, which won't be raised by normal payroll taxes, is 8.1 percent of U.S. GDP, or total national income. So, option A (to actually pay for all of the benefits already promised) would involve increasing federal tax revenues by roughly 81 percent immediately and forever.

Option B would be for Congress to cut benefits or bump up the age at which people can collect Social Security or Medicare benefits, (or even do something really crazy like stop giving welfare to wealthy people).

The latter would involve some sort of an income or assets cutoff for Social Security and Medicare eligibility.

Two thirds of all U.S. wealth is held by those over the age of 65. That is people who already do, or will soon, receive Social Security and Medicare benefits.

Continued...

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