Don't bank on your financial future

Last week, I broke my longstanding habit of avoiding horror movies to go see "Paranormal Activity."

It was extremely scary and a great way to spend $5 this Halloween season, if you enjoy horror flicks.

However terrified you are by the film, though, you should be doubly afraid of another real life specter - the impending retirement of all the baby boomers.

"Baby boomers" is the name commonly given to the massive group of people born between the end of WWII and 1962. Many of us have parents or grandparents born in that time frame and they are all rapidly approaching retirement.

Together, they represent a fiscal tidal wave of unfunded liabilities or entitlement money promised by the government that will exceed the revenue generated by entitlement taxes (Medicare and Social Security payroll taxes).

In May the trustees of both Medicare and Social Security released their annual reports on long-term budget outlook.

What they said amounts to a much scarier and more gruesome blood-bath than anything you will see in "Paranormal Activity."

Former Treasury Department economist and current Forbes magazine contributor Bruce Bartlett said the calculations in the two reports add up to $106.4 trillion, with a "t" in unfunded liabilities.

In other words, the difference between the amount of benefits promised to current and future Social Security and Medicare recipients and the amount of revenue that will be raised by Medicare and Social Security payroll taxes is probably more than twice the total amount of private wealth in the entire country.

The total amount promised to current and future retirees by Social Security and Medicare, which won't be raised by normal payroll taxes, is 8.1 percent of U.S. GDP, or total national income. So, option A (to actually pay for all of the benefits already promised) would involve increasing federal tax revenues by roughly 81 percent immediately and forever.

Option B would be for Congress to cut benefits or bump up the age at which people can collect Social Security or Medicare benefits, (or even do something really crazy like stop giving welfare to wealthy people).

The latter would involve some sort of an income or assets cutoff for Social Security and Medicare eligibility.

Two thirds of all U.S. wealth is held by those over the age of 65. That is people who already do, or will soon, receive Social Security and Medicare benefits.

It is, therefore, absurd for the government to require transfer payments from those with less money, who haven't had time to save for their eventual retirement, to older people who, on average, have a great deal more money than those supporting them with Social Security and Medicare.

On paper, Congress should easily be able to enact some version of option B.

What is not included on paper is that people over 50 made up more than 40 percent of all votes cast in 2008 and are almost always the most heavily represented group at the polls in this country.

These people vote, pay taxes, read the news and watch CNN.

Thus, they also hold political sway far beyond their already huge numbers.

No member of Congress in his/her right mind is likely to stir up this electoral hornet's nest by advocating option B (cutting benefits) out loud. And anyone who follows politics knows that saying you want to raise taxes on anyone except the wealthy is always anathema to politicians.

So, that means both of the previous options are out of the question for now.

That leaves option C: Congress could stick its collective head in the sand and refuse to deal with ugly entitlement realities that would require unpopular decisions.

Instead, Congress could propose a massive expansion of Medicare, or something like it, to everyone in America under the guise of health care reform. And … we have a winner!

Option C is exactly what Congress, or at least the Democratic majority in Congress, has been trying to do since July of this year.

The political blogosphere is abuzz of late with rumors Democrats are even considering selling their public option (as they love to call it) by comparing it to Medicare, since Medicare is such a popular program.

Of course it's popular. Who wants to pay for their own health care?

Even if Congressional Democrats are unsuccessful in passing Medicare for all, it seems a near certainty Congress will succeed at one of its favorite games - that of passing the buck on entitlement funding to the next Congress, which is just as likely to do the same, and so on.

So, if you are under the age of 30, one way or another the baby boomers and their entitlements are likely to eat up just about all of your disposable income for your entire working life - that is unless enough members of Congress magically become more worried about the country's fiscal future than their own political future.

Since I wouldn't count on that prospect, it's time for young people in this country to inform themselves about issues and make themselves even more difficult for politicians to ignore than the A.A.R.P. crowd.

ehelmuth@unews.com