Some of societys most intractable problems come not from its failures but from its successes. Often you cant get a good thing without paying a bad price.
A prime example is our public old-age pension system Social Security. It has been completely successful in wiping out poverty among the elderly. Old ladies no longer have to eat cat food to survive.
But we pay some prices for this. One is a lower savings rate. China has a humungous savings rate in part because it has no reliable old-age pension system. People have to save if they dont want to starve.
In the United States we got out of the habit of saving. In the decade up to the financial crash of 2008 the U.S. savings rate fell below zero.
We felt comfortable borrowing on the supposedly ever-increasing values of our houses to support current and sometimes lavish consumption. Now were paying the price.
But even if our savings rate rises back to the level of say the 1980s it still may be lower than optimal.
The longer-term price any society pays for a public old-age pension system is lower birth rates. Farmers had large families in order to provide additional labor for their working years and sources of income for their dotage. So did factory workers a century ago.
In Western Europe birth rates have fallen below the rate necessary to replace population -- in some countries far below. The American birth rate has remained barely above replacement rate largely because of immigration. But immigration has slumped during the recession and may never return to the 1990-2008 level.
Unfortunately under Social Security like most public pension systems current pensions are paid for by current workers. As lifespans increase and birth rates fall the ratio of pensioners to active workers falls toward one-to-one.
Thats not enough to support the elderly in anything like the style to which they have been accustomed unless tax rates are sharply increased. And sharply higher tax rates as Western Europe has shown over the last three decades reduce long-term economic growth.
Thats the problem often abbreviated as entitlements facing our political system.
Some politicians have tried to address it. Fresh from his re-election victory George W. Bush sought changes in Social Security in 2005. The obvious reform then as now was to reduce high earners pensions by adjusting them upward by inflation rather than wage growth.
But Democrats would have none of it. As Bushs job approval plummeted in the wake of Hurricane Katrina and lack of success in Iraq the issue was quietly dropped.
This year Republicans addressed entitlements again in the budget prepared by House Budget Chairman Paul Ryan and approved in the House.
His proposal was to shift Medicare from the current plan to premium support in which seniors would get subsidies to pay for their choice of competing insurance plans. This is similar to the Part D Medicare prescription drug program that has won wide acceptance and has cost far less than projections.
Once again Democrats have responded negatively. They credit their Mediscare tactics for a special election victory in a Republican House district in upstate New York.
Whats interesting is that in contrast to 2005 we have had nothing in the way of presidential leadership on this issue. Barack Obama hailed by some conservatives and most liberals as a pragmatic problem-solver has been happy to play politics on entitlements as well as on the budget.
He blithely ignored the recommendations of his own commission headed by Erskine Bowles and Alan Simpson. He has said since he would take a look at raising the Medicare eligibility age -- its now lower than the Social Security age.
But anyone can take a look at a proposal. We pay presidents a good salary to lead not just to look.
So far the Republican presidential candidates have not done much leading on entitlements either. They have tended to take a gingerly approach to Paul Ryans Medicare proposal and Newt Gingrich even trashed it.
The conventional wisdom is that this is simple political prudence. Dont give the other side a juicy target.
But we are faced not only with a huge short-term budget problem but with the prospect of a Western European future of an enlarged government ever higher taxes and lower growth. Is that really what American voters want?
Michael Barone senior political analyst for The Washington Examiner (www.washingtonexaminer.com) is a resident fellow at the American Enterprise Institute a Fox News Channel contributor and a co-author of The Almanac of American Politics.
Some of societys most intractable problems come not from its failures but from its successes. Often you cant get a good thing without paying a bad price.
A prime example is our public old-age pension system Social Security. It has been completely successful in wiping out poverty among the elderly. Old ladies no longer have to eat cat food to survive.
But we pay some prices for this. One is a lower savings rate. China has a humungous savings rate in part because it has no reliable old-age pension system. People have to save if they dont want to starve.
In the United States we got out of the habit of saving. In the decade up to the financial crash of 2008 the U.S. savings rate fell below zero.
We felt comfortable borrowing on the supposedly ever-increasing values of our houses to support current and sometimes lavish consumption. Now were paying the price.
But even if our savings rate rises back to the level of say the 1980s it still may be lower than optimal.
The longer-term price any society pays for a public old-age pension system is lower birth rates. Farmers had large families in order to provide additional labor for their working years and sources of income for their dotage. So did factory workers a century ago.
In Western Europe birth rates have fallen below the rate necessary to replace population -- in some countries far below. The American birth rate has remained barely above replacement rate largely because of immigration. But immigration has slumped during the recession and may never return to the 1990-2008 level.
Unfortunately under Social Security like most public pension systems current pensions are paid for by current workers. As lifespans increase and birth rates fall the ratio of pensioners to active workers falls toward one-to-one.
Thats not enough to support the elderly in anything like the style to which they have been accustomed unless tax rates are sharply increased. And sharply higher tax rates as Western Europe has shown over the last three decades reduce long-term economic growth.
Thats the problem often abbreviated as entitlements facing our political system.
Some politicians have tried to address it. Fresh from his re-election victory George W. Bush sought changes in Social Security in 2005. The obvious reform then as now was to reduce high earners pensions by adjusting them upward by inflation rather than wage growth.
But Democrats would have none of it. As Bushs job approval plummeted in the wake of Hurricane Katrina and lack of success in Iraq the issue was quietly dropped.
This year Republicans addressed entitlements again in the budget prepared by House Budget Chairman Paul Ryan and approved in the House.
His proposal was to shift Medicare from the current plan to premium support in which seniors would get subsidies to pay for their choice of competing insurance plans. This is similar to the Part D Medicare prescription drug program that has won wide acceptance and has cost far less than projections.
Once again Democrats have responded negatively. They credit their Mediscare tactics for a special election victory in a Republican House district in upstate New York.
Whats interesting is that in contrast to 2005 we have had nothing in the way of presidential leadership on this issue. Barack Obama hailed by some conservatives and most liberals as a pragmatic problem-solver has been happy to play politics on entitlements as well as on the budget.
He blithely ignored the recommendations of his own commission headed by Erskine Bowles and Alan Simpson. He has said since he would take a look at raising the Medicare eligibility age -- its now lower than the Social Security age.
But anyone can take a look at a proposal. We pay presidents a good salary to lead not just to look.
So far the Republican presidential candidates have not done much leading on entitlements either. They have tended to take a gingerly approach to Paul Ryans Medicare proposal and Newt Gingrich even trashed it.
The conventional wisdom is that this is simple political prudence. Dont give the other side a juicy target.
But we are faced not only with a huge short-term budget problem but with the prospect of a Western European future of an enlarged government ever higher taxes and lower growth. Is that really what American voters want?
Michael Barone senior political analyst for The Washington Examiner (www.washingtonexaminer.com) is a resident fellow at the American Enterprise Institute a Fox News Channel contributor and a co-author of The Almanac of American Politics.
