We are constantly reminded of the horror our children and grandchildren will endure when they are faced with paying off the huge federal debt we have foisted on them.
I'm not so sure; when the time comes they may not be particularly concerned. They might be much more apprehensive about the erosion of entitlements — the gutting of Medicare, and the atrophied Social Security. The vast majority (80 percent of the population) could have serious concerns about their ability to survive during the alleged "golden years."
Let us first ascertain that it is imperative that we get the deficit under control. Balancing the budget is a prodigious task, yet we must find a way to bring the annual budget deficit down to zero, or at least no higher than the rate of inflation. When this comes to pass, and the budget is balanced (I can't blame you if you remain skeptical) our children will face a national debt of something around $20 trillion and the task of what to do about it.
As I noted above, they will likely do nothing. Certainly there will be an occasional token payment to mollify the masses, but otherwise our citizens and particularly our legislators, would probably care less. Why? To begin with, in sometime between 24 and 36 years (reflecting inflation of 2 to 3 percent), the impact of the debt will be cut in half. That is, we'll have twice the revenue to pay the debt interest.
From another viewpoint, if we continue to pay 2 to 3 percent interest on our treasury bonds, and inflation remains 2 to 3 percent, the borrowing will cost the country nothing. But the biggest reason is that no self-respecting politician would ever turn down a chance to spend money. If a surplus is looming, and the vicious tax cutters are held at bay, your loyal representative will claim that while other legislators' projects are pork, the few he has for his district are economic imperatives.
After years of malnutrition during the deficit reduction years, the politicians will be most eager to "bring home the bacon" to their district and in doing so, ensure their re-election for another term.
There is, at present, no clear-cut plan to reform Social Security. This is probably because it poses no obvious threat to our nation's solvency. We have recommended a Social Security supplement system, entirely consumer funded, that would result in the present pension becoming much less relevant for generations born in the 21st century. Once established and, presumably, showing strong gains over a decade or two, the public would become inured with the potential and might become amenable to some form of privatization.
Medicare is quite another issue. The U.S. Rep. Paul Ryan plan purports to change the system from defined benefit to defined contribution. This rather confusing analogy to employer pension systems suggests that the government would contribute less and the consumer, more, to the cost of senior health care. Some aspects of the Ryan plan deserve comment. The means testing portions (i.e., the rich pay higher premiums) could be very useful in protecting our most vulnerable seniors — those earning less than the national median. The prospect of raising the eligibility age from 65 to 67 needs thorough contemplation. Our proposed Social Security pension supplement system augers for early retirement — low to mid-60s in many cases. Not having Medicare available until age 67 certainly puts a chill on early retirement plans.
Since the Ryan plan would not go into effect until 2020, it seems that some experimentation in the interim could prove propitious. The simplest test might be to have the Department of Veteran Affairs set up several new hospitals, (or expand existing facilities) to serve Medicaid. Area residents on Medicaid would be instructed to take their health issues to the designated (under a different name) VA hospital.
Once things settle down and positive evidence appears that the VA can deliver quality health care at roughly half the cost of the private system, the local Medicare crowd could be invited to utilize the facility and avoid the 20 percent Medicare deductible. If this works, the possibilities are endless.
Another effort that might prove useful would be to enact malpractice reform much like the legislation passed by the state of Texas. Additionally, we espouse a trust fund that would begin paying dividends to help retirees with their Medicare premiums after their 65th year and likely would pay all health-care expenses sometime between their 80th and 90th birthday. If this system were installed and proved popular during the current decade, we might have a much clearer idea before 2020 of what we should do about escalating Medicare costs.