Newsweek's Samuelson: Deferring hard choices on retirement

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ROBERT J. SAMUELSON NEWSWEEK

Deferring hard choices on retirement

April 6, 2005

The great danger of an aging society is that the rising costs of government retirement programs – mainly Social Security and Medicare – increase taxes or budget deficits so much that they reduce economic growth. This could trigger an economic and political death spiral.

Our commitments to pay retirement benefits grow while our capacity to meet them shrinks. Workers and retirees battle over a relatively fixed economic pie. The debate we're not having is how to avoid this dismal future. President Bush's vague Social Security proposal, including "personal accounts," sidesteps the critical issues. His noisiest critics are equally silent.

Just recently, the trustees of Social Security and Medicare issued their annual reports on the programs' futures. Here's one startling fact that emerges from a close examination of the reports: by 2030, the projected costs of Social Security and Medicare could easily consume – via higher taxes – a third of workers' future wage and salary increases. We're mortgaging workers' future pay gains for baby boomers' retirement benefits.

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Because the dangers are so obvious, we ought to be minimizing them now. We ought to redefine the generational compact to lighten – somewhat – the burden of an aging population on workers. The needed steps are clear: to acknowledge longer life expectancies by slowly raising eligibility ages for Social Security and Medicare; to limit future spending by curbing retirement benefits for the better-off; to keep people in the productive economy longer by encouraging jobs that mix "work" and "retirement."

All advanced societies face a similar problem: how to support more retirees with (relatively) fewer workers. But we won't engage it. Let someone else make the hard choices, years from now when they will be much tougher.


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