Jewish World Review March 6, 2001 / 11 Adar 5761
Bush and Congress should prepare for lean years
WASHINGTON needs somebody to play the Torah's Joseph, as Pharaoh's budget director, made Egypt save during its seven fat years so it could survive the lean years that followed.
To secure the retirement of the baby-boom generation, lawmakers should help workers set up private savings accounts before voting on tax cuts or spending increases.
Both President Bush and Congressional Democrats claim they want to make prudent use of the nation's anticipated $5.6 trillion surplus -- while accusing each other of wasting it. But both sides are thinking only about the next 10 fat years, not the 30-odd lean years to follow.
In the Bible, Joseph foresaw Egypt's future by interpreting Pharaoh's dream, but the United States' future can be foretold, at least partly, by looking at demographics: It will take in the neighborhood of $5 trillion a year to pay retirement benefits in 2040.
The total so-called "unfunded liability" facing the country for retirement programs from 2015 to 2040 -- even assuming no improvement in Medicare benefits -- is about $10 trillion.
Joseph got Egypt to lay aside a fifth of its harvest during the fat years as a reserve for the lean ones, but the United States has only the vaguest notion of how to prepare for the boomers' retirement, much less those of the coming generations.
Both Bush and the Democrats say they will lay aside (in a "lockbox") $2.5 trillion of the surplus derived from Social Security to pay down the national debt.
Bush claims that it's entirely possible to carve a $1.6 trillion tax cut out of the remaining $3.1 trillion non-Social Security surplus while increasing spending for defense, education and medical research and providing a prescription drug benefit for Medicare recipients.
Democrats say it isn't possible and that Bush is plunging the country back toward budget deficits. Because both parties want to lockbox the Medicare surplus of $400 billion, they say the available surplus is really $2.7 trillion.
They contend that Bush's tax cut will cost $2 trillion, counting resultant interest payments the government will have to make.
On top of that, Democrats assert, both parties will want to extend various tax credits that are due to expire and will want to prevent middle-income taxpayers from being forced to pay the alternative minimum tax designed for the rich -- all of which will cut the surplus down to $200 billion or $300 billion.
That, they argue, leaves nowhere near enough for a prescription drug benefit, education and defense increases, farm relief and various emergencies that might arise.
The Democrats and centrist groups such as the Concord Coalition make a good case that Bush's tax cut is too large -- especially when it's not clear that the projected surpluses will materialize. On paper, the Democrats have a more prudent alternative.
They would devote $900 billion each to tax cuts, new spending and funding to pay down some of the $3.2 trillion national debt faster than can be done using Social Security and Medicare surpluses alone.
The problem is, the $900 billion Democrats want to devote to paying down the debt almost certainly would get spent on some program or other unless it is specifically set aside for "the lean years."
Bush suggested again Tuesday night that he would try to meet the long-term retirement burden by reforming Social Security, allowing each younger worker to invest part of his or her taxes in private savings accounts.
This strategy would allow workers to earn higher interest on their money than Social Security would reap, thereby lightening the burden their children will bear in supporting their retirements.
The problem is, it will cost an estimated $1 trillion to set up private accounts -- money also needed to support current retirees.
In a new departure, Bush said some of this money would be available because it's not possible to fully pay down the national debt; therefore, some Social Security surplus money could be used for that purpose.
However, the estimated $500 billion he's targeting won't be sufficient to cover the cost. Before spending or tax-cutting away the "fat years'" surplus, there ought to be an adequate set-aside for the lean ones.
If there is a Joseph around Washington now, the closest to it is Bob Bixby, head of the Concord Coalition, who recommends using $1 trillion of the $2.5 trillion Social Security surplus to finance private accounts and up to $2 trillion of the non-Social Security surplus to pay down the debt.
"You can't do a big tax cut, Social Security savings accounts and big-time debt reduction simultaneously," he said. "One has to be scaled back, and Bush has chosen to scale back private savings accounts for now."
But those accounts could help increase the country's plummeting personal savings rate -- another protection against the lean years to come.
"Bush is missing the opportunity to use the bully pulpit to be the baby-boom savior and use today's prosperity to fund tomorrow's obligations," Bixby told me.
Bush is a regular Bible reader. For budget advice, he should turn to Genesis, Chapter
JWR contributor Morton Kondracke is executive editor of Roll Call, the newspaper of Capitol Hill. Send your comments by clicking here.
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