The Debt Burden Our Children Will Pay — Ha! Ha!

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The
estimated future burden of the unfunded liability grows like cancer
day by day.

Because of this, the Federal government does not officially report
on this figure — at least not where the media can get at it. (Because
of this, one publisher spotted an opportunity.).
There are various private estimates, several of them in excess of
$50 trillion.

How will this
be paid off? It won’t be.

I was warned
in the spring of 1959 that the Social Security system would go bankrupt
in my lifetime. My high school civics teacher made that statement.
I believed him.

He did not
tell us that our generation would impose a massive debt burden on
our own children. He said the system would go bankrupt — not our
children.

He was a very
perceptive man.

I hear about
the terrible burden that we are placing on our children — tens of
trillions of dollars of additional debt. I have read that every
two American workers in 2020 will be required to support a retiree.

To which I
answer, "So the gray heads think."

All this talk
about our overburdened children would be amusing if it were not
so personally suicidal — but not for them.

This idea of
an imposed debt burden comes from a naive view of politics. It assumes
that people do not vote their own self-interest when they step into
the voting booth. It assumes that voters are woefully ignorant about
the extent of the state’s extraction of wealth from them. It assumes
that they can’t count.

So, let’s talk
about our overburdened children.

THE PRESENT
BURDEN

People under
age 65 constitute the overwhelming majority of voters. It is true
they are not organized nearly so well as the old folks are. But
when voting machine push comes to lobbyist shove, the geezers are
about as safe as the old person on the chunk of floating ice that
the tribe has placed him on, along with two days of blubber.

Let us conduct
an experiment in self-realization. I have a two-choice question.
Think about the present tax costs of Social Security/Medicare. You
are paying around 15% of your income below $94,200. That’s most
of your income, right? Also, unlike the income tax, you get no deduction
from your gross income for any charitable donations.

When you pay
this money every paycheck, what thought comes to mind? (You don’t
need to raise your hand.)

  1. I am doing
    this for the sake of the old folks, who would starve without my
    contribution. (That’s what the FICA tax is called — a contribution.)
  2. I am doing
    this, so that I will get my fair share of the loot when I move
    into the special-interest age group called "senior citizens."

Of course,
you chose answer #1. But you suspect that 99.9% of all those other
taxpaying, money-grubbing voters would choose #2.

Your suspicions
are correct.

The reason
why this albatross is still firmly tied around our necks is that
we like it there. No politician comes to us with this offer:

Vote for
me, and I will vote to cancel all of your Social Security/Medicare
taxes, next year and forever.

Why not? Because
he knows his constituents have made a cost-benefit analysis regarding
their own self-interest. They have figured out that, at the margin,
what they will have to pay between now and their retirement is a
lot less than what they will receive after they enter the ranks
of voters with catheters.

Of course,
his opponent will never mention this cost-benefit analysis. Instead,
he will run on this slogan:

My opponent
wishes to hurt all Americans over age 64. A vote for him is a
vote for organized cruelty.

This slogan
will appeal greatly to the self-interested, calculating majority,
who will dutifully vote for the caring politician who speaks on
behalf of the doddering, drooling oldsters. Also, the doddering,
drooling oldsters will also take time off from the air-conditioned
nineteenth hole to go down and vote for him.

Social Security/Medicare
is the supreme example in American life of the politics of plunder.
It has an enormous constituency.

The Social
Security system is called the third rail of American politics. "Touch
it, and you die." It is the third rail because of well-organized
self-interest.

THE THIRD
RAIL

Every year
or so, some statistician dutifully comes before a Congressional
committee and reports his grim findings on the estimated unfunded
liability of Social Security and Medicare
. Then he goes home.

Congress of
course does nothing. Well, not quite. It may vote to increase the
unfunded liability, as it did with the Medicare prescription drug
bill. But as for seeking actuarially rational solutions to the problem
of the unfunded liability, Congress does nothing. So, the number
continues to grow.

The politicians
do occasionally do a little grandstanding for the folks back home
who are still on wages-earning payrolls. They say something like
this:

We must be
aware of the burden that we are placing on our children. We must
not destroy the American way of life through of unrestrained government
debt.

Well, they
don’t actually say this. They know the risk: They might break out
into the giggles. So, they have their speech writer insert the phrase
into one of those long speeches that are printed in the Congressional
Record — speeches that are never actually delivered on the floor
of Congress. Then, when printed the next day, another staffer sends
a clipping of the speech to the district’s throwaway weekly newspaper,
to be printed there. Nobody is expected to read the speech. But,
just like the Congressional Record, it fills space.

The politician
can then quote from the speech in some future campaign brochure.

Everyone is
happy. The oldsters, their snouts deep into the age-specific benefits
trough, raise their heads for a few moments to say, "It sure
will be tough on future generations. Something ought to be done
about it." Then, still famished, their snouts go back into
the trough.

Middle-aged
taxpayers, hoping that their place at the side of the trough is
secure, proclaim: "It’s good to keep the younger generation
appraised of the problem."

Members of
the younger generation, mentally exhausted from an afternoon of
watching MTV or the Cartoon Channel, do not read campaign brochures,
let alone a throwaway newspaper. They are unconcerned. They do not
think ahead ten years, let alone thirty.

Why should
they? They have been taught that "deficits don’t matter."
They have been taught that savers are losers. They have been taught
that the key to economic growth is consumer spending, and they are
doing their best to give the economy a shot in the arm.

They have the
one thing that oldsters don’t have: life expectancy. When they finally
do a cost-benefit analysis on what it is costing them to secure
their place at the trough, and it comes out negative, they will
find a politician who has spotted that rare but crucial event: the
cutting of the high-voltage current to the existing third rail and
its re-routing to another.

Those who control
a majority of the handles in the voting booths control the crucial
handle that distributes the flow of political voltage. It determines
a society’s third rail.

"I
SHALL LAY MY BURDEN DOWN!"

The burden,
so called, is a burden only for as long as the person carrying it
decides that it is worth carrying. If he and those like him ever
decide to vote as a bloc to have the burden transferred elsewhere,
Congress will respond.

Where can it
be transferred? To the oldsters. This process has already begun.
I was guaranteed that at age 65, I would be entitled to full retirement
benefits. Then the law was changed. Now I must be 65 and eleven
months.

This is what
political scientists call "a broken social contract."
It is what politicians call "responding to the will of the
people." I call it "stiffing the geezers."

What can be
done once without political repercussions can be done again. And
again. And again.

The third rail
has already been touched. No one died.

Of course,
the entrenched special interest groups will resist. They will say
that this burden is too great to bear for older people. To which
the younger generation will respond, "Stuff it, granny. The
gravy train is over."

When the middle-aged
workers see that their time to get at the trough is being extended,
they will do their cost-benefit analysis. There will be a move toward
the exits.

There will
be a great reversal. Each extension of the date of full retirement,
each reduction in benefits, will lead to additional defections in
the ranks of the still-employed trough-seekers. Each increase in
time paying into the system, and each reduction of the time spent
at the trough, will scare off the pigs at the margin. The welfare
state’s spiral upward, which culminated with Bush’s prescription
drug benefit, seems to have reversed course. That unfunded liability
hike was in all likelihood the last hurrah of the catheter set.

There are other
ways to lay down this burden. Monetary inflation is one way. But
won’t that trigger increases in the government’s cost-of-living
index? Not if the government declares price and wage controls, thereby
freezing the official cost-of-living index. That will create shortages,
but they can be blamed on hoarders.

CONCLUSION

We should not
feel too sorry for our children and grandchildren. They will learn
what makes politicians jump. The fear of voter retaliation is always
there. When a new issue arrives, the politicians will take polls
of public sentiment. They will count noses. This is the politicians’
version of the sacraments.

There is a
burden, and it is massive. It consists of estimates based on laws
that can be changed. They are based on promises that can easily
be broken. They are based on assumptions that are nave. They are
based on a welfare state morality that is no more secure than a
cost-benefit analysis by a few million taxpaying voters.

Those aging
voters who think the government owes them for past payments are
like workers who believe that companies will pay retirement benefits
even though the numbers tell managers that a strategic declaration
of bankruptcy would lay their burdens down. As Seemless put it in
that great old blues song (2005),

I work my
fingers to the bone.
And you know I’m slipping down so low.
Getting down on my knees praying for release.
Lord, won’t you help me?
And I feel the weight dragging down on me.
There’s redemption coming.
That I seek.
I close my eyes.
Close my eyes to see this is what it means to bleed.

Corporate
managers, like politicians, impose bleeding rather than suffer it.
Their redemption draweth nigh. Not granny’s, however.

September
21, 2006

Gary
North [send him mail] is the
author of Mises
on Money
. Visit http://www.garynorth.com.
He is also the author of a free 17-volume series, An
Economic Commentary on the Bible
.

Gary
North Archives

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