Work Longer, Retire Later
Posted on April 24, 2010My wife’s boss, George LeMieux, the junior Senator from Florida, gave me a startling statistic the other day. He said that he got it from Erskine Bowles, President Clinton’s former chief of staff.
According to LeMieux, the Federal government is taking in roughly 23 trillion in tax revenue, but spending roughly 34 trillion. That is bad enough, but what is chilling about these numbers is that the 23 trillion that we are taking in only covers the costs of entitlement spending. Entitlement spending is the money we pay for Social Security, Medicare and the federal portion of the Medicaid programs.
For everything else, including national defense, the State Department, the FAA, etc, we have to borrow money from the Chinese and other generous foreign governments. How does that little fun fact grab you? I feel more confident about America’s future, don’t you?
Now Democrats will say that there is an easy way to close this gap: Raise taxes on the rich. But if you raised taxes to one-hundred percent on all the rich people, the gap would likely still grow, because when you raise taxes on rich people, you usually get less revenue.
The only way to really deal with this is find a way to stop the growth of entitlement programs. It would help if the President wouldn’t create new entitlement programs, which of course, is what he is trying to do with the new health care law. The other way is to get people to work longer and retire later.
According to the Washington Post this morning, the International Monetary Fund (IMF) is preaching exactly that message to all Western democracies, but targeting that message to the U.S. The IMF is best known for telling developing countries that are teetering on bankruptcy to cut spending if they want to get bailed out.
Now, they are telling us the same thing.
As the Post puts it, “To keep the global economy on track, people in the United States and the rest of the developed world need to work longer before retiring, pay higher taxes and expect less from government. And the cheap imports lining the shelves of mega-chains such as Wal-Mart and Target? They need to be more expensive.
That's the practical meaning of a series of policy papers and statements issued in recent days by IMF officials, who have a long history of stabilizing economies and solving global financial problems, as they plot a course to keep the world economy growing and reduce the risk of another "great recession."
I don’t know if I agree with the raising taxes part (although, as I have noted before in this space, it is unsustainable to have 47 percent of the American people not pay any federal income taxes), but the rest is spot on.
People have to retire later. I have a friend of mine who just retired at age 55. He put in 30 years of government service and now he is collecting a nice check every month from the government for doing, well, nothing. I value his service, but 55 is way too young to retire. He still has all his faculties, he still has his health, and frankly, I don’t want to use my taxpayer money to have him sit around his house and do nothing. Where in the Constitution does it say that federal workers get to spend the last 30 years of their lives living off the hard work of the taxpayers, just because they spent the previous 30 years working for the government?
We also have to have greater balance in the world’s economy. The Chinese need to buy more stuff and we have to buy less stuff. And the currency differential between the dollars and the yuan needs to be closed, so that U.S. manufacturers can compete with the Chinese.
LeMieux points out that at this rate, we will be in the same economic spot as Greece by 2020. Greece, as you may recall, is so broke, it is very, very close to defaulting on its loans. We don’t want to go there.
Politicians, by their very nature, like to avoid hard choices as long as possible. But pretty soon, we are going to have nothing but hard choices to make. Better to start now to control the cost of entitlements rather than wait later, and have to take drastic action to keep America solvent.