WILL AMERICA GROW UP
By Peter G. Peterson
The system has worked pretty well. It has been expensive but not, so far, anything the nation can't handle. Trouble is, the coming explosion of baby-boomer retirements threatens to destroy the arrangement. The great debate of the next decade will be over what to do about it.
Peter G. Peterson, an investment banker and former Commerce Secretary who has developed something of a second career as a deficit hawk, takes on the challenge in Will America Grow Up Before It Grows Old? He lays out the problem in straightforward terms: Once the postwar generation starts retiring in droves, there will simply not be enough workers to pay the taxes to provide the benefits the boomers have come to expect. The boomer-geezers will overwhelm the entire government.
In 20 years, by some estimates, the cost of just four programs--Social Security, Medicare, government pensions, and Medicaid--will exceed anticipated federal revenues. To put it another way, without a massive tax hike, there won't be a farthing left for the military, the national parks, drug enforcement, environmental protection, or anything else. The solution is to make retirees more self-sufficient and less of a burden on taxpayers. That, as the politicians have discovered, is easier said than done.
What to do? Peterson has a laundry list of proposals. He would raise the age at which retirees are eligible for government benefits from 65 to 70. He would place an affluence test on all benefits, sharply reducing payments to those making more than $40,000 in 1996 dollars. He'd force many of the elderly to buy private long-term-care insurance and require them to accept higher costs or less choice for their health care. In addition, Peterson would gradually replace Social Security with a mandatory private-pension system, keeping only a vestigial safety net for the poorest.
Many of his ideas are provocative, although some fail the reality test. For instance, Peterson brags that, at 60, he started a new company, and, at 70, he ''can't imagine quitting.'' Neither can the millions of fifty- and sixtysomethings who are being forced out of their jobs by employers looking to cut costs. Peterson can find many of them bagging groceries at the Piggly Wiggly.
You may not agree with his solutions, but don't ignore Peterson's warning. These are real problems. And they are going to have to be fixed soon. Waiting for a crisis, as Washington usually does, will be catastrophic both for retirees and for the political system as a whole.
By Howard Gleckman
Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.