If you've ever taken one of my classes on American politics or comparative public policy, these won't come as news to you. But if you haven't, or if you want a quick refresher, this op-ed from today's Washington Post is a must read: 5 Myths About the Bust That Will Follow the Boom(ers)
1. As boomers quit working and ease into their golden years, they could break the backs of the younger workers who will have to support them.Not so. Even at the peak of boomer retirement, around 2030, most of the population will still be of prime working age, between 20 and 64. The percentage -- about 55, according to the Social Security Administration -- will be lower than it is today (59), but above the levels of the 1960s and '70s, when it ranged between 51 and 54 percent. Not only will a larger portion of the population be of working age than in the past, but a much higher percentage of that group will be available to provide goods and services. Forty years ago, most women didn't work outside the home; these days, about 60 percent do -- and the number keeps going up. In addition, national defense employed more than 10 percent of the workforce in 1968...
2. We're running out of time to fix senior-citizen entitlement programs before a crisis strikes.
Actually, we're out of time. If it was politically impossible to solve this problem when the number of retirees was comparatively small, there's no chance for a major fix as the ranks of the elderly -- and their political clout -- grow. There may be some minor changes in the way benefits are taxed or adjusted for inflation, but it's already too late for any big fix....
3. Boomers' retirement will be bad for the economy.
Not really. It'll be bad for the federal budget, sure, but it will actually be good for the economy as a whole. As retirees, the boomers will continue to buy goods and services, but they won't be competing for jobs. This will tend to push wages up, keep unemployment low and boost demand across the board...
4. The politicians know what needs to be done; they just lack the will to do it.
They may lack the will, but they almost certainly have no idea what needs to be done. Estimates of future Social Security and Medicare spending are based on complex economic and demographic models that are quite sensitive to even modest changes in key assumptions. No one really knows the size of the problem facing the federal budget, and very few people understand all the moving parts.
5. Saving the budget will require either major reductions in the old-age entitlement programs or major tax increases -- or both.
Actually, probably none of the above. Unless there are major changes in benefit rules or in the population, spending on Social Security and Medicare will grow dramatically over the next few decades. But many economic changes are likely to mitigate the effects on the budget. For example, as the workforce shrinks, the demand for labor will grow, pushing up wages and thus increasing payroll taxes, giving the government more income. Higher wages mean that more people are likely to choose to work, and to work longer before retiring. These changes, and many others like them, are likely to offset most of the increases in Social Security costs even without changes in tax rates. That will still leave a bill to be paid, but a manageable one. Medicare benefits are a much more complicated matter, but society is going to provide health care to the elderly one way or another. The issues there have more to do with how to provide that care and how expensive it will be than with who writes the checks.
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