FISCAL OVERSTRETCH

Niall Feguson and Laurence J. Kotlikoff has an interesting piece in the current issue of The National Interest, available in PDF format here. For some odd reason, I can’t get the text select tool to operate to allow me to post excerpts.

They begin by noting that toppling three tyranies–Milosoveic, the Taliban, and Saddam–in four years is an impressive achievement and contrasting this with the American declinism school of thought popularized by Paul Kennedy and others a decade before. They note the irony that Kennedy has recanted much of his argument, noting the unforeseen Revolution in Military Affairs, precisely at a time when some of his arguments may in fact be coming to fruition. Most notably, they cite the U.S. fiscal overstretch caused, not by military spending, but domestic programs, notably transfer payments to the elderly.

In just five years’ time, 77 million “baby boomers” will start collecting Social Security benefits. In eight years…Medicare benefits. By the time they are all retired in 2030, the United States will have doubled the number of its elderly population but increased by only 18 percent the number of workers able to pay for their benefits.

At the same time, benefits for these retirees are growing rapidly, resulting in “a doubling of consumption per retiree relative to consumption per worker.”

FILED UNDER: Economics and Business
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Dean Esmay says:

    This is going to be the major domestic issue of the next few years, as young people begin objecting to higher and higher payroll taxes, and oldsters begin asking themselves just how much they’re asking their children and grandchildren to put up with.

    The solutions? Screw the grandkids, lift the earnings limit on the payroll tax, start means-testing, ask some Americans past a certain retirement income level to forego collecting–probably some combination of the above.

    And I continue to believe that moving toward some sort of privatization is an inevitability. Young people want this, for the most part. I thus think that part’s just a matter of time. The longer we wait, the more contentious the fight between generations is likely to get, unfortunately. 🙁

  2. Well, privitizing the system will cost just as much as keeping it public; you’ve got to pay off the one-generation overhang.

  3. Well, privitizing the system will cost just as much as keeping it public; you’ve got to pay off the one-generation overhang.