Intergenerational equity is a provocative catch-phrase bracketing some of the most important fiscal debates of our time, from today through mid-century. The crucial question posed by intergenerational equity is this: To what extent are post-50 adults financially obligated to future generations? More pointedly: Are those over 50 about to bankrupt the nation as federal entitlement programs become fully accessible and ubiquitous among 76 million old people?
David Walker, former Comptroller General of the United States, quantified the crushing "unfunded liabilities" confronting the nation. As Walker told CNBC, "...we have over $50 trillion in off-balance sheet obligations, $37 trillion for Medicare, $9 trillion for Social Security, and those numbers grow faster than inflation and faster than the economy when the economy grows."
These huge debts must be paid by today's young generations if Privatize-Now pundits are correctly reading their crystal balls. Post-50 adults are ostensibly handing entitlement program invoices to their children and grandchildren. Someday, these generations will die off, having been great parents and grandparents but lousy ancestors. Debt-ridden progeny will see the nation's standard of living race in reverse.
Intergenerational equity implies that the post-50 generations have one clear and present moral choice: privatize federal entitlement programs so that younger generations will not be penalized by the size and cost of a rapidly aging population. It means that post-50 citizens accept what their parents would not: federal entitlement programs are a Ponzi scheme, history's greatest embezzlement, robbing from younger generations to pay country club dues and wasteful surgical procedures given to elders. This nation does not owe, nor can it afford to fund a geriatric leisure class -- a gerontocracy.
Intergenerational equity means cancelling longstanding socioeconomic contracts between generations that help pay the costs of growing old, becoming sick and eventually dying. When the nation curtails public obligations to cover high costs of old age, society lifts crushing fiscal burdens off the backs of younger generations.
Arguments for public policies shaped by intergenerational equity:
- Entitlement programs are unfunded liabilities backed by IOU's in the form of government bonds. According to the trustees, Social Security's trust fund will run dry in 2036, and Medicare will be exhausted by 2024. The nation is already broke and busted. It is reprehensible to hand unfunded programs to young adults and even unborn children.
- Younger generations should not be required to pay healthcare and retirement costs of their parents and grandparents. The only equitable system is pay-as-you-go, with surpluses saved for tomorrow. Elected leaders have already misappropriated entitlement surpluses planned for by the Greenspan Commission in 1983 to hedge against eventual Boomer old age.
- Medical advancements are extending lives, and the oldest old are dying later from horrific, expensive and slow-moving diseases such as Alzheimer's, partially due to scientific mastery over rapid killers such as heart disease and cancer.
- It is the moral obligation of older generations to make the future better for succeeding generations, as the GI Generation did when it created a post-World War II economic boom that so enriched the lives of Boomers. As the nation careens toward bankruptcy, today's post-50 adults are creating unprecedented circumstances where younger generations may anticipate a declining standard of living.
Arguments against public policies shaped by intergenerational equity:
- Boomers and older generations have freely -- and without much complaining -- paid Social Security and Medicare taxes that are now benefiting mostly older generations. The oldest have been paying these taxes with every paycheck for over 50 years; the youngest for over 25 years.
- Boomers have enriched the economy with their wealth and free spending at each life-stage, creating booms in everything from fast food and rock music to housing and desktop computers. This generation's wealth has enriched older and smaller generations. (If you owned a house in 1970, you enjoyed a rapidly appreciating asset thanks to Boomers flooding the market en masse.) This generation's wealth has benefited younger generations through loving material indulgences from birth onward -- many continue to do so today, providing respite for young adults returning to their parents' homes after college as financially dependent "twixters."
- So what if the primary economic engine of America becomes healthcare augmented by public financing? The twentieth century can be thought of as an automobile economy that created a national highway system, parking garages, suburbs, shopping malls, gasoline companies, car companies, and drive-through Starbuck's. A healthcare economy can also create tens of millions of jobs for physicians, nurses, biotech engineers, genetic researchers, software architects and home healthcare aides. Technologies developed to prolong productive life have extraordinary value and could be marketed as exports to rapidly aging countries such as Sweden, Japan and China.
- Privatization scaremongers may harbor self-serving objectives. Study the composition of the boards of directors for some of the outspoken privatization advocates and discover mutual fund managers, investment advisers and former government officials who might make fortunes if the federal government tosses entitlement programs to the private sector.
Wizards of public financial engineering are pressing hot-buttons that frighten and confuse, just as the Wizard of Oz initially intimidated Dorothy and her friends. But scare tactics and guilt trips must not be the impetus for sweeping social, fiscal and political re-engineering.
Intergenerational equity rolls off the tongue with a satisfying sound of moral rectitude, but this policy premise needs a full and articulate public hearing by informed citizens. Before the nation embraces the entitlement naysayers and their strident predictions of financial collapse, a wise citizenry has an obligation to pull back the curtain and peer into the hearts of the wizards, assessing their motivations -- financial and otherwise.