To the President and Members of Congress:
Like most Americans, we are pleased to learn that the federal budget is on track to reach balance well ahead of schedule, perhaps even in this fiscal year. The good news is a testament not just to our strong national economy, but also to your own fiscal leadership.
Remember -- We've Only Taken the First Small Step
At the same time, the Concord Coalition is distressed to hear so many public figures suggesting that, with surpluses now in the forecast, the time for belt-tightening is over. Some are clamoring for across-the-board tax cuts. Others want to set the budget table with a smorgasbord of new cash, health, and social service entitlements designed to appeal to almost every age group. Apparently, no one has told them we haven't paid for the meal we've already ordered.
We urge you to resist these fiscal temptations. Do not undermine the progress on the deficit we've already made. And do not forget that this progress represents only the first small step toward confronting the vast fiscal threat looming over America's future.
Let's face the facts: Even the near-term budget outlook remains uncertain. With so much talk about spending the newly projected surpluses, the public might think they're already in the bank. But they're not. If the economy catches the Asian flu, if another bear market chokes off the windfall capital gains revenues filling Treasury's coffers, or if the future spending cuts promised in last year's budget deal aren't enacted in full, the surpluses may never materialize. And even if they do materialize, they will be relatively small and strictly temporary.
What Happens When America Becomes a Nation of Floridas?
Beyond Washington's limited ten-year time horizon, the outlook hasn't really improved at all.
Now as before, an onrushing age wave is due to push up the number of retirees five times faster than the number of workers -- ultimately transforming America into a nation of Floridas. Now as before, Social Security benefits are projected to exceed earmarked tax revenues by ever-widening margins. This shortfall will begin adding to the public debt in 2012 and rise to $615 billion annually by 2029, the last year the program's deceptive trust funds are technically solvent. Now as before, the combined burden of Social Security and Medicare is scheduled to reach 35 to 55 percent of worker payroll by the time today's toddlers are raising their own families. This cost explosion will flatten the very middle class so many of you promise to help with tax cuts. And now as before, every official agency concludes that our long-term future is filled not with surpluses, but with economy-shattering deficits -- unless senior entitlements are reformed. As the Congressional Budget Office dryly observes, "The good news is likely to be fleeting...the outlook for the deficit in the long run is gloomy."
Proper Accounting Reveals a Federal Budget Still Deep in the Red
Such ominous budget projections should cause you to reconsider today's small budget victories. Indeed, they call the victories themselves into question. Applying proper accounting methods to the federal balance sheet reveals a budget that is still deep in the red -- and that won't come anywhere near balance at any foreseeable future date.
As you are aware, the official budget balance includes Social Security's current trust-fund surplus. Senator Moynihan reminds us that this surplus is supposed to be saved to help prefund the Baby Boom's retirement -- and denounces double-counting it as "thievery." Exclude it from the calculations, and, according to the Congressional Budget Office, this year's deficit rises by $100 billion.
But that isn't all. Even if Social Security's surpluses were saved, it would defray only a tiny fraction of the mountain of unfunded benefit liabilities the federal government has accumulated -- a lien against tomorrow's taxpayers now totaling at least $15 trillion. Were the federal budget to account for its unfunded Social Security liability the way federal law requires private corporations to account for their pension liabilities, this year's deficit would instantly rise by over $500 billion. And Social Security, of course, isn't the only benefit program that obligates future taxpayers. Account honestly for the unfunded liabilities of Medicare and federal civil service and military pensions as well, and this year's deficit would rise by over $1 trillion.
In short, we aren't even close to paying our own way. Once the books are examined up close, the coming decade of surpluses turns out to be a mirage.
It's Time to Focus on Long-Term Entitlement Reform
Look around you at where America stands today. The economy is booming. The world is at peace. And, with the Baby Boom still in the workforce and a small "Depression" generation retiring, we enjoy a demographic balance more favorable than anyone now alive will see again. Then ask yourselves: Is today's budget policy really the best we can do?
It's time to stop sending false signals. It's time to acknowledge that cutting taxes today makes no sense if that cut will only necessitate raising taxes even more tomorrow. It's time to drop the pretense that a stack of Treasury IOUs accumulated in a government trust fund adds up to genuine retirement security. It's time to raise savings on all ledgers, public and private. Most important, it's time to focus on long-term entitlement reform, including both Social Security and Medicare, whose spending growth will otherwise overwhelm everything else we do.
If we can achieve cash surpluses over the next decade or beyond, using them to pay down the national debt would be perfectly sound practice. Another possibility is to dedicate surpluses to the investments an aging society needs to undertake -- such as making the down payment on a funded system of personally owned Social Security accounts or encouraging households and employers to set aside a much greater share of current earnings toward the future cost of retirement. Over half of all working-age Americans are neither covered by a private pension nor possess financial assets worth six months of wages. As such, they are totally dependent on unsustainable government benefit programs. For the sake of our families as well as our economic future, we need to shift to a secure retirement system that relies on genuine savings -- not unfunded promises.
A Unique Opportunity to Act on Behalf of the Future
The time to act is now while we can still change course gradually and give everyone time to prepare. With so much going so well today, America has a unique opportunity to act on behalf of the future. But this window for action is rapidly closing.
Americans are profoundly worried about the future our children will inherit. Perhaps the first step to securing a better future is to set a better example -- and to show our children how an older generation can dedicate itself to the benefit of posterity. Commenting on the economic harm that squandering budget surpluses would inflict on our children and grandchildren, economist Herbert Stein recently wrote, "To prefer our generation over future generations is not immoral, although that is not the choice I would make. But to act as if we're not making a choice between the present and the future -- that is irresponsible." Let's be more blunt. Choosing the present, as columnist David Broder puts it, would be "this generation saying to the next: We're getting ours, and to hell with you."
Concord's founding co-chair, the late Paul Tsongas, used to say that it is not enough for our children to love us, they should respect us as well. The choice is yours to make. As you ponder it, think what future Americans will say if they recall that when history asked us to think of them we only thought of ourselves.