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Think $700 billion is bad? Just wait until the Baby Boomer bailout
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Brian Riedl
"You ain't seen nothing yet, b-b-b-b-baby, you ain't seen nothing yet."
With apologies to Bachman Turner Overdrive, that's the message from the Heritage Foundation with respect to the $700 billion Wall Street bailout compared to the bailout the country will need to pay for the unfunded Social Security and Medicare wrought by aging Baby Boomers.
The Heritage Foundation is a conservative thinking think tank and one of its thinkers, Brian Riedl, wrote recently that unfunded Social Security and Medicare obligations total $41 trillion.
As Congress wrestles with how to cope with the bailout plan and market jitters, Riedl wants lawmakers to take a long view of another financial crisis that looms as being 60 times worse that the current situation on Wall street.
He offers some simple math: In the 1960s, five workers footed the bill for each retiree's benefits. Today, that radio is three to one. Then it gets worse.
"The coming retirement of 77 million Baby Boomers will drive that ratio down to 2-to-1 by 2030. That means every two children born this year and who marry in 2030 will have to support themselves, their children - and the Social Security and Medicare benefits of their very own retiree. The cost will be staggering," said Riedl.
If Congress does nothing and expects to fund these programs at their current rate, according to Riedl, one of three things would have to happen:
1) Tax rates would have to double;
2) Every other federal program would have to be eliminated;
3) The federal budget goes bankrupt.
The impending retirement of 77 million Baby Boomers is not theoretical. It can't be dismissed or wished away. And when the inevitable Social Security and Medicare costs come, taxpayers will demand to know why lawmakers ignored the warnings," said Riedl.
These warnings aren't new. Actuaries and others have long sounded the warning bell that current benefits are not sustainable in the long run. But the issue is the third rail of politics. Just as everyone knows not to touch the electrified third rail of a subway track, politicians are hesitant to approach the third rail of Social Security and Medicare reform. Touch it and you're politically fried.
Heritage Foundation
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