Generational Warfare Over Social Security?
DALLAS, TX (October 25, 2001) – Baby boomers will begin to retire soon and start receiving Social Security and Medicare benefits, beginning an enormous conflict over resources that conceivably could result in generational warfare, according to a study released today by the National Center for Policy Analysis (NCPA).
"The 77 million baby boomers who will begin to retire in this decade will cease paying into the system. Instead, they will drain resources from it," said Laurence J. Kotlikoff, professor of economics at Boston University and co-author of the NCPA study. "By 2030, the cost of elderly entitlement programs will double today's cost relative to the national income."
The NCPA study contrasts the Social Security and Medicare benefits expected by new retirees with what workers now entering the labor market can expect, and finds them to be very different. On average:
- A 65-year-old male can expect to receive $71,000 more in benefits than he pays in taxes before he dies. A 65-year-old female can expect a net gain more than twice that amount.
- Conversely, a 20-year-old male can expect to pay $312,000 more in taxes than he will receive in benefits. His female cohort can expect to pay $92,000 more in taxes than she will receive in transfer benefits over her lifetime.
"An American born today can expect to pay 17.7 percent of lifetime income over and above any benefits ever received, and it will only get worse," Kotlikoff added. This generational disparity can be avoided, however, by enacting harsh but immediate remedies:
- A permanent increase in saving and investment equal to 10 percent of payroll.
- The increase in funds needs to be invested in interest-earning assets than can be sold in future years to pay benefits, promised under current entitlement programs.
"Social Security must be reformed," Kotlikoff said. "If politicians refuse to raise taxes or cut benefits, they will be forced to borrow-piling up debt that will only escalate each succeeding year."