Want Social Security and Medicare Someday? Start Having Babies
The new Medicare and Social Security trustees reports serve as a reminder that these important programs are on a certain path toward insolvency. By 2026 and 2033, respectively, their so-called trust funds will run empty and neither program will be able to pay its scheduled benefits to future retirees. That means millennials can expect, for example, an automatic 23% cut in our Social Security checks upon retirement if nothing changes. Ouch.
Our aging population is one of the primary reasons for the growth in entitlement spending and the resulting shortfall in funds. Ten thousand baby boomers will retire today, tomorrow and every day for the next 19 years. By 2030, nearly one in every five Americans will be over the age of 65. More people than ever before will be collecting from Social Security and Medicare.
The problem? Our government has not adequately prepared for these demographic trends, which we have seen coming for decades. Quite simply, politicians have overpromised and underfunded benefits. The result is a fiscal gap of a combined $39.6 trillion over the next 75 years. That’s not pocket change, even for Uncle Sam.
The good news for current retirees is that young people and future generations are footing the bill to keep their benefits flowing. In the case of Social Security, the pay-as-you-go system relies on the tax dollars of today’s workers to financially support those who are retired. In the case of Medicare, the government can simply borrow money to cover its shortfall, which essentially just passes the bill to the future.
According to the Urban Institute, the average two-income earning couple retiring in 2010 will collect $244,000 more in Social Security and Medicare benefits over the course of their lifetimes than they paid into the system. Who gets the tab? Their children and grandchildren of course, who have ironically been dubbed by the boomers as the “Me Me Me” generation. (The “broke” generation might be a more appropriate description.)
The bad news for future retirees is that, like any pyramid scheme that begins to turn upside down without adjustment, the financial model for our entitlement programs will eventually fail and the tab will come due. Remember, that’s in just 13 years for Medicare and 20 years for Social Security — yet there is no action in Washington. And when politicians delay, young people pay. The tax increases and benefit cuts necessary to fix these programs grow more severe every year we do not act because we are exempting a growing portion of current workers and retirees.
So what’s our generation to do?
The easiest (and perhaps most enjoyable) thing we can do is simply have children. And lots of them. You see, we can take a lesson from our elders and pass the buck to the generation that follows our own. Luckily, at least in the case of Social Security, we have just enough time. A child conceived this year could be a taxpaying worker by 2031, helping to close a shortfall that we have been unable to close on our own. But it only works if there are significantly more of them than there are of us.
No doubt, quickly boosting our current fertility rate by 80% to 1950’s levels won’t be easy. Due to the Great Recession, according to Pew Research, 20% of millennials have postponed marriage and 22% have put off having a child. In order to change this, we need to get the word out that while having children may be a short-term cost, it is a long-term investment in our financial security. Maybe the millions of dollars being spent by various organizations to champion proactive entitlement reforms could instead be funneled into a public relations campaign for procreation.
Do we have any other options? Maybe some options that wouldn’t require abdicating our moral obligation to the future? Sure.
Theoretically, we could rely on our elected leaders to make some sensible changes that would ensure our entitlement programs are sustainably solvent. That might include things like slowing the growth of annual benefit increases, means testing benefits so that wealthier seniors collect fewer benefits, increasing health care premiums and tying the retirement age to growing life expectancy. These policies can be crafted in such a way that protect the most vulnerable while requiring shared sacrifice from all generations.
But that seems impractical in this time of hyper-partisanship. After all, what incentive do our leaders have to make politically difficult decisions in the interest of the next generation? Even though there were more eligible young voters in 2010, seniors made up a 7% greater share of the electorate because they turned out to vote at more than double the rate of the young. The 113th Congress is one of the oldest in U.S. history, with just 6% of members below the age of 40. In addition, the AARP is the most powerful lobby in Washington and spent nearly $10 million on lobbying in 2012.
It’s not hard to understand why Washington keeps kicking the can down the road: there currently is no coalition for the future. Too few young people are voting, running for office and joining advocacy organizations. The bottom line is this: if millennials want to preserve their economic opportunity and retirement security, then we have a choice to make – either get involved or get busy.
Nick Troiano is co-founder of The Can Kicks Back, a non-partisan and Millennial-driven campaign to defeat the national debt and reclaim our American Dream.