Boomers Versus the Rest

Probably no political platitude is more invoked or more ignored than this: let's do it for the kids. Everyone recognizes the moral power of making sacrifices today for our children's well-being tomorrow. That's why most politicians embrace this promise, as Barack Obama has. "We know we have to get spending under control in Washington so that we're not mortgaging our children's future" was a favorite campaign line. Just last week, in an interview with The Washington Post, Obama again promised to overhaul "entitlements." But alas, politicians don't always practice what they preach.

Generational tension, and maybe generational war, is an inevitable part of the Age of Obama. It's known that America is graying. In 1960, only one in 11 Americans was 65 or older. Now it's one in seven, and by 2030, it's expected to be one in five. What's less understood is that the political system favors the old over the young in this fateful transformation. We risk becoming a society that invests in its past.

The plight of the U.S. auto industry provides an ominous warning. For years, the Big Three and the United Auto Workers constructed an ever-more-generous system of early retirement and retiree health benefits for their employees. But ultimately, the costs became oppressive. The main victims were younger workers, whose jobs, wages and benefits were squeezed to protect retirees.

Similarly, the promises made to retiring baby boomers may impose crushing costs on society. Taxes may rise, other government programs—from national parks to college grants—may suffer and long-term economic growth may slow. Again, the main victims would be today's young, who would pay higher taxes and receive fewer public services.

Already, the three major programs serving the elderly population—Social Security, Medicare and Medicaid—account for two fifths of federal spending. In fiscal 2008, that was $1.3 trillion out of total spending of $2.98 trillion. By contrast, all defense spending totaled $613 billion.

The impending bulge of baby-boom retirees presents no good choices. Taxes? Higher spending on Social Security, Medicare and Medicaid could require massive increases in federal taxes—about 50 percent from present levels by 2030. This estimate assumes that other programs remain constant as a share of national income. Well, what about cutting some programs? Paying for baby boomers' added retirement costs this way would require the elimination of most defense spending or most other domestic programs.