The Debt Young Americans Should REALLY Care About
Writing in today’s Washington Post, occasional columnist Bryan Lawrence analyzes the perilous financial state of Medicare. He notes that while Americans think that their Medicare benefits are fully “earned,” in reality payroll taxes only cover about half the program’s cost:
Medicare is a transfer of wealth from younger to older Americans. As long as the baby boomers were working and paying taxes, their large numbers made this transfer to their parents and grandparents affordable. But the boomers began to retire last year.
Recent work by the Urban Institute calculates the amount of the transfer to an average retiree. An American man retiring in 2011 could expect to receive Medicare benefits worth $170,000 (in 2011 dollars). If he had worked from age 22 at the average U.S. wage each year, he would have paid Medicare taxes (plus interest) worth $60,000 (also in 2011 dollars). So the average male worker retiring in 2011 will receive benefits worth almost three times what he paid in. And the transfer to that retiree will be $110,000 from younger Americans, perhaps including his grandchildren….
Would Americans be as satisfied with Medicare if we were reminded each year about the hundreds of thousands of dollars that our retirement will cost our grandchildren?
That Medicare represents a massive transfer of wealth from the young to the old is a fact many Americans remain unaware of – but one that should cause future generations significant pause. Even as the Administration attempts to manufacture a political conflict on student loans this election season, many younger Americans should also be worried about their share of trillions of dollars in entitlement debt – obligations that young people will face in the future, because today’s politicians do not have the courage to reform our outdated and unsustainable entitlement programs.