Entitlement Spending is a Clear and Present Danger to the Future Of Millennials
Stanley Druckenmiller, one of the most successful hedge fund managers in America, has sounded off about the risks associated with uninhibited growth of Social Security, Medicare, and Medicaid. He said, "The mushrooming costs of [the aforementioned entitlements] with unfunded liabilities as high as $21 trillion, will bankrupt the nation’s youth and pose a much greater danger than the $16 trillion of debt currently being debated in Congress." Druckenmiller was interviewed by Stephanie Ruhle on Bloomberg TV. He commented that "[he is] not against seniors. What [he is] against are current seniors stealing from future seniors."
I have addressed the problems Druckenmiller highlighted in several previous essays (here is one of them). In them, I indicated that unabashed millennial support of Obama’s financial strategy to kick the impending entitlement crisis down the road is ill-founded. The president’s policies and comments are misguided and detrimental to millennials in the long-term. Entitlements, if not reformed, will in fact bankrupt this country. Millennials would be wise to support those who want to address the nation’s debt problem now lest they spend their careers paying for older people and then be subjected to less government support when they are qualified to receive it.
Here are some specifics and predictions provided by Druckenmiller and Bloomberg in the interview.
- Unsustainable spending will eventually result in a crisis worse than the financial meltdown in 2008, when $29 trillion of global equity was lost.
- Government expenditures related to the elderly rocketed in the past two decades, long before the first baby boomers turned 65.
- In 2011, Social Security, Medicare, and Medicaid accounted for 44% of the government’s $3.7 trillion budget, up 34% since 1990.
- Seniors have a very large and powerful lobby. "They keep getting more and more transfer payments from younger people." The AARP has more than 37 million members.
- In 2010, the U.S. Census indicated that there were 40 million people 65 years and older. By 2020, the number is expected to exceed 55 million.
- By 2030, there will be about two workers per retiree, down from 3.4 workers in 2000. The arithmetic impact of this change in demographics on entitlements is obvious.
- If a three-year-old today is taxed at the same rate as today’s working population, he will get less than half of the benefits that current seniors are getting.
Druckenmiller suggests changing eligibility ages for Social Security and benefit structures for wealthy retirees. Additionally, he said elimination of the capital gains tax and dividend income tax benefits would provide some relief because they affect a greater proportion of seniors.
Druckenmiller intends to spend a significant amount of time speaking to younger people to help them understand the risks they face in future years under current economic policies.
It is time for millennials to speak up and get involved economically. Political activism must include an awareness of the impending mega-crisis relating to entitlements. The suggestions and predictions of people like Rep. Paul Ryan are not scare tactics. They are realities that will hurt millennials more every day that they are ignored.
Seniors have their money. Our concern should be focused on our children and grandchildren who will be denied the benefits currently available to seniors if reform is delayed.