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Education Funding Opinion

It’s Generational Warfare, Now Deal With It

By Rick Hess — September 07, 2011 5 min read
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Folks, generational warfare is here. As Congress’s “super committee” begins its deliberations with an eye towards its November deadline, and as the debate for 2012 heats up, it’s time for those in the education space to pick a side. You’re either with the kids or with those rushing to the ramparts to defend retiree entitlements. So, which is it?

Consider the President’s vague calls last week to spend billions more on school construction and preserving school staffing levels (which would’ve been more compelling if he had offered any inkling as to how we might pay for it). Obama finds himself unable to do more than offer marginal, dead-on-arrival programs because the feds have spent more than half the budget just mailing checks to retirees, covering health care bills, and paying interest on the accumulated debt. Everything else—schools, financial aid, the FBI, defense, transportation, the environment, NASA, foreign aid, you name it—has to make do with what’s left.

As Julia Isaacs at the Brookings Institution has pointed out, the federal government now spends about $7 on seniors for every $1 it spends on children—even though the poverty rate among children is higher, with 21 percent of all children in families under the poverty line. Hell, the median net worth of married elderly couples in 2008 was $385,000—more than three times median household net worth nationally. Do we really think it’s a good idea to spend half of all non-interest spending on making retirement ever more comfy? Because that’s where we are. I know my progressive friends are aching to insist that we can do it all, that we can avoid serious cuts and unpleasant talk of “winners” and “losers"—but the problem with overpromising is you eventually have to deal with the consequences.

Contrary to talking points from AARP and the rest of the “screw-the-kids” seniors’ lobby, today’s retirees have not paid for the generous bennies they’re pocketing. For instance, today’s huge budget driver is our massive spending on Medicare. Yet today’s retirees have contributed taxes that amount to less than half their Medicare outlays. Today’s Medicare payroll tax doesn’t fund Medicare--it funds only Part A (hospital expenses). Premiums cover just 25 percent of Part B (doctor treatments and visits). And premiums for Bush’s Medicare drug program (Part D) cover just 10 percent of the cost. The rest of the hundreds of billions in outlays for these programs is vacuumed out of general revenue. (See here for a good breakdown on Medicare funding.)

Social Security has the government reflexively spending hundreds of billions to mail out monthly checks to the wealthiest segment of the population, without an ounce of thought as to whether that’s the best use of borrowed funds (the famed Social Security “trust fund” being, you know, nonexistent). The Social Security Administration reports that more than 20 percent of those 65+ have incomes over $65,000 a year. In a nation where median household income is in the $40,000s, is it really radical to rethink how much we mail to these households every month?

You say that tax increases have to be part of addressing this? Sure, that’s fair enough. Given what we ask the federal government to do today, the revenues we collect are woefully short. We need to ask for less and pay for more. But, keep in mind that we can ditch the Bush tax cuts across the board (those on families earning $250,000+ and on everyone else) and it erases less than 20 percent of the $24 trillion federal debt that the Obama White House currently projects for 2021. Toss in all of the tax deductions that President Obama called for eliminating this summer, including the corporate jet deal, and you address another $400 billion over 10 years, or less than 2 percent of the shortfall. So, just keeping the deficit from exploding will involve all those taxes and trillions more in cuts. Those demanding substantial new spending then need to raise hundreds of billions beyond that, through additional cuts or tax increases.

(And, for what it’s worth, once you let the Bush tax cuts expire, the effect of federal, state, and Medicare taxes means that families earning $250,000 or more will face a combined marginal tax rate of about 50 percent in most states. That may be fine, but even progressive economists concede that there’s a point, perhaps not too far above that, where the rate is high enough to discourage work and investment.)

Even with hefty tax increases, protecting existing entitlements ensures that we won’t have much available for schools, colleges, or anything else. If youth advocates want to be taken seriously, they need to demand that retirees and aging Boomers step up. After all, it was them—and not today’s kids—who voted for the leaders who delivered expansive social programs, generous Social Security and Medicare benefits, unfunded foreign conflicts, and hefty tax cuts... and paid for it all with borrowed funds.

Modernizing the Social Security inflation adjustment and gradually raising the retirement age from 67 to 69 would save trillions over the next 25 years. Raising premiums on Medicare Part B to the 50 percent rate that was originally promised would save more than $500 billion over the next decade. Limiting Social Security and Medicare benefits for the 30 percent of the 65-plus population that the Census Bureau classifies as “high income” could save hundreds of billions, or trillions, over the next decade. In short, it’s possible to get our house in order, free up dollars for schooling, and shift dollars towards youth. But doing so requires facing down the massive, intimidating seniors’ lobby.

Shared sacrifice involves asking Baby Boomers and retirees to step up and, you know, sacrifice. It doesn’t mean holding harmless the generations who voted themselves free stuff through the good times and doesn’t rely almost entirely on raising taxes and curtailing benefits for the under-40 set. I keep waiting to hear the edu-advocates make this point, loudly and forcefully.

So, edu-advocates, how about it? I hear your impassioned calls to do the right thing “for the kids.” So, are you ready to start wrenching bucks away from a generation of indulged Baby Boomers and affluent retirees to make that happen? Or is your advocacy more of a self-congratulatory hobby? Just asking...

The opinions expressed in Rick Hess Straight Up are strictly those of the author(s) and do not reflect the opinions or endorsement of Editorial Projects in Education, or any of its publications.