Baby Boom BOOM!!
The Baby Boom is about to go BOOM, and Michigan’s already
shaking. We’ve talked about
it for years, and now it’s here: the retirement of the Boomers. All the
folks born between 1946 and 1964, ages roughly 46 to 64, make up 26% of
the US population. The older folks are reaching the retirement age: how
do we pay for it? There are several answers, and we get to pick one.
The current discussion in Lansing and at every level of
government revolves around costs. Costs are driven by personnel costs,
and a huge proportion comes from benefits. What’s really the onrushing
train are the unfunded liabilities. Those IOUs are staggering.
Here in Michigan, the unfunded
liability—mainly for retiree health care—is about $40 billion, with $25B
owed to public school employees.
This, plus pension costs which in Michigan are relatively—but not
perfectly—funded, are the boulder on the back of governments. First off,
we have to realize that the Benefit Boulder problem isn’t a Michigan
thing or a government union thing
in isolation. It’s part of the bigger picture of Baby Boom
retirement. The gap between
funding and unfunded benefits is $1 trillion, according to a
Pew Center Report.
We’ve known for years that there’d be costs and we closed our eyes for
years. In the meantime, Americans made their own plans.
With the Flood coming, government unionized labor used their muscle—and
they have a lot of muscle—to get
themselves seats on the Ark. You really can’t blame them; that’s their
job. If the Flood is coming, and Social Security won’t keep you afloat,
it makes sense for unions to negotiate their members into the
lifeboat.—or the luxury suites as the case may be. However, the problem
is that government union benefits, as well as current compensation, have
risen beyond what the public can afford.
One trillion bucks in IOUs is a lot of money. Forty billion in IOUs is a
lot of money. How are we going to deal with the debt that currently we
can’t pay? Well, the way I see it, we have four choices.
ONE: We can keep going on like now,
business as usual. Keep handing out unpayable IOUs, racking up debt and
raising taxes to pay for it all. But people are already balking at
paying higher and taxes to keep their public servant in benefits better
than they have. Even if it is all “for the children.”
TWO: we can repudiate it. Just say
“sorry! No money.” Or we can force a settlement for dimes on the dollar.
The public opinion shift
has already begun (see ONE above), and it explains why public sector
unions have been so desperate to convert current health care benefits to
“contractual obligations” despite the fact we can’t possible pay them.
THREE: we can inflate it away.
Washington can just (keep?) printing money. “Sure I owe you $100,000.
Here’s a couple of $50K pieces. They used to be ‘half dollars.’”
Inflation is not only morally repugnant, but it’s social suicide.
Destroy all stored value and you get…well, Hitler.
FOUR: we can grow. That’s right! We
can grow!! We can grow our economy, which will create the wealth to pay
for the benefits. As a by-product, we’ll also achieve prosperity and
opportunity for our people and our kids. A growing economy means there
are jobs. The folks who get those jobs will spend money, and create more
jobs. They’ll all pay taxes, and you’ll get revenue for the schools and
roads. Michigan can become again a wealthy place where we can afford to
pay the current IOUs.
We can grow our way to the future! But
to do that, we have to do certain things. We’re going to have to realize
that high taxes and increased government overhead kills economic
activity and strangles growth. Our taxes have to lower, and other costs
as well. This will mean that public sector workers will have to give up
some of the compensation they’ve
gotten over the years, so we can cut the cost of government, so we can
grow, so we can pay their benefits..
For years this suggestion arouses rage in the heart of the good union
teacher or cop or government worker. But look at it this way: If you
want to buy a house, you can’t go out to eat every night or buy the
plasma TV. You’re deferring your wants today so you can have something
good in the future. Public employees are going to have to choose. Good
stuff today or benefits tomorrow?
We advocate things like lower taxes, government reform, a freer economy,
more incentives for enterprise for a reason. It’s not that “low taxes,
less government” came from Moses, or Ronald Reagan liked them, or we
took a poll about it. These things are the formula that has always led
to economic growth, jobs, and prosperity.
And as the Baby Boom goes BOOM, not only is growth a good thing,
but it’s the only road to a future we’d like: Michigan enjoying a
different kind of boom.
