An unsurprising bit of news broke this past week–some highly respected experts screwed up.
A few years back economists Kenneth Rogoff and Carmen Reinhart claimed that countries with high debt loads suffered slow growth rates. Their research was used to justify draconian spending cuts in Europe. But it turns out Rogoff and Reinhart flubbed their numbers in a big way, and Keynesians like Paul Krugman have been having a grand old time gloating over it. But just because Roghoff and Reinhart were wrong doesn’t mean Krugman is right.
Every year, we spend more than a trillion dollars more than we take in. That’s a dire situation. But how we’re spending that borrowed money is the real crime. In short, old people are killing us. That’s right, I said it: if we don’t do something soon, grandma and grandpa are going to bleed us dry.
Take a look at this handy chart from Heritage.org and tell me I’m wrong:
As you can see, Social Security and Medicare suck up roughly half of all federal outlays. Meanwhile four percent goes to K-12 education and transportation projects. So instead of investing in things like infrastructure and job training–otherwise known as, you know, our future–we’re showering geriatrics with borrowed cash.
I’m not saying we should let our senior citizens starve or live in poverty. But a great deal of them simply don’t need the money we’re spending on them, and haven’t put nearly as much into the system in their lifetimes as they’re taking out now. Worse still, the baby boomers are only starting to retire. With a sluggish economy and high unemployment, we’ve got a shrinking pool of younger workers (making less money) to pay for the benefits their parents have come to feel entitled to.
I don’t have an easy solution for this problem, because one doesn’t exist. It might be helpful if seniors got a statement every month that showed exactly how much more they’re receiving in benefits than they paid in. Maybe that can help start the discussion about tougher measures like means testing and higher taxes. The only thing we can’t do is nothing. And that’s the real danger of the Rogoff-Reinhart scandal. They may have put out a flawed report that led to lousy policies. But economics is called the dismal science for a reason–there are plenty of bad ideas to go around. And the worst one possible is called the status quo.