Federal Reserve Chairman Ben Bernanke had some
remarks today about the costs of paying for the retirement of the Baby Boom generation. Apparently he discovered that a whole bunch of the people he grew up with were going to be retiring in a decade or two or three and that the Bush Administration's totally irresponsible pattern of spending and borrowing is going to cause problems. How nice of him to notice. Well, not really. He may be starting to warm up for the Bush Administration's new and improved version of "Gut Social Security" called "Gut Social Security
and Medicare".
Lowlights:
In that case, the taxes collected by the federal government would have to rise from about 18 percent of GDP today to about 24 percent of GDP in 2030, an increase of one-third in the tax burden over the next twenty-five years, with more increases to follow.
Of course he ignores that spending has been well above the 18% collected in taxes. Why isn't he on Capitol Hill telling the Republicans to raise taxes today so we don't have a problem?
Maybe not:
Besides tax increases, spending cuts, or reform of the major entitlement programs, the fourth possible fiscal response to population aging is to accommodate a portion of rising entitlement obligations through increases in the federal budget deficit. The economic costs and risks posed by large deficits have been frequently discussed and I will not repeat those points today. Instead, I will only observe that, among the possible effects, increases in the deficit (and, as a result, in the national debt) would shift the burden of paying for government spending from the present to the future.
No, we wouldn't want to point out how hypocritical the Republicans are on the deficit.
By saving more today, we can reduce the future burden of demographic change. However, as any economist will tell you, there is no such thing as a free lunch. Saving more requires that we consume less (to free up the needed resources) or work more (to increase the amount of output available to dedicate to such activities). Either case entails some sacrifice on the part of the current generation. Consequently, a tradeoff exists: We can mitigate the adverse effect of the aging population on future generations but only by foregoing consumption or leisure today.
If we increase taxes that will increase the savings rate. I wonder why he doesn't offer that as step one?
His concluding paragraph started with:
Reform of our unsustainable entitlement programs should also be a priority.
Except that nothing in the speech showed us that this increase was unsustainable. He merely asserted it as if it were a fact, even though the United States has the lowest tax burden of all OECD countries. Bernanke may not have been advocating cutbacks in Social Security today, but it was clear that he was trying to set up the terms of debate. If we had a responsible government today, we would be able to sustain Social Security and expand Medicare so that it covers everyone. Don't buy the lies.