Ryan Streeter
Yesterday I looked at Washington’s war on the young, and on Wednesday the topic was Washington’s war on the poor. If you’re not young or poor, you might be feeling left out. So, today’s post is Washington’s war on…you!
Let’s start with three basic facts and then tie them together with a few observations:
- In ten years, when this year’s Obama budget will have added $26 trillion in additional debt to our economy, every single baby boomer will be above 55 years of age (the first wave of boomers to reach retirement age has already arrived). And remember, they’re called baby boomers because they were a baby boom – meaning, there were a whole bunch of them. Paying their Medicare and Social Security will drive up our deficit to unprecedented levels. The picture of our deficit as a percentage of GDP basically looks like this:
- 45% of government revenues, according to CBO, will come from individual income taxes in 2011. 37% of government revenues come from the payroll taxes you and I and our employers pay. Only 9% comes from corporate taxes. In other words, if you think “big business” and all those corporations are footing the bill, they aren’t. We are. Taxes on individuals are the primary fuel in the federal government’s engine. A lot of people think business pays a greater share than they do.
- Because (1) the retirement costs of boomers and subsequent retirees will burgeon uncontrollably (first bullet), and (2) the costs of all of this mess are born mainly by individuals (bullet 2), this means that (3) if we don’t reform the programs, we’ll all have to live with big spikes in our payroll taxes. Just look at Social Security (a minimal problem compared to Medicare). According to Andrew Biggs, if Congress is unwilling to change how the program works (how much it pays, and to whom), we’ll need to increase payroll taxes immediately from 12.4 to 15.7 percent, more than a one-quarter increase. If we wait, we’ll have to go up to 16.2 percent in 2020. And so it goes. You and I pay half of those payroll amounts, our employer the other half. I don’t think any of us is all that excited about watching our share jump by one-third.
Through out entitlement programs, we as a nation have become quite comfortable with social welfare for the middle class. Pretty soon, our transfers of taxpayer dollars to the retirement and health care of older middle - and upper middle - class people will outweigh whatever we spend on poorer people if it doesn’t already.
ObamaCare just took this one step further. Most of the criticism of ObamaCare from the right has had to do with the price tag and the government’s intrusion into the private health care market. But perhaps it’s most sinister element, in my view, is the way it sought to make middle class families dependent on government. It guarantees subsidies to 111 million Americans under the age of 65 for health insurance. This includes, for instance, a family of four earning $88,000 per year.
The co-opting of the middle class as a distinct social welfare group is the story of our generation.
There are many who will see no trouble with this and say, “Look, I’ve paid my fair share, so now it’s time for me to get my due” (and judging by mail I’ve received, there are conservatives who also feel this way).
But the first three bullet points above should make it pretty clear why the co-opting of the middle class has become a tragedy: we simply cannot afford it. We as individuals pay a big part of the bill each year, and we’ll all be paying a lot more very soon.
There is virtually nothing about the spending cuts debate in Washington right now that affects any of this.
Along with repealing ObamaCare, only reforming entitlements will do the trick. Fortunately, Republicans have said they’ll propose entitlement reforms in their April budget. They have not yet worked out which reforms, and how aggressive they will be. And, of course, we know they will be met with a firm "no" from the new Party of No, the Democrats, as Charles Krauthammer astutely calls them in his column today. This means the road to real reform will be bumpy.
So, in the meantime, we all have a role to play in telling lawmakers we’ll live with a reformed entitlement system in order to save our future. This will help give the politicians a push from you and me to do the right thing.
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