Growing Older / Liz Taylor
Coming economic chaos must be addressed now

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Fast-forward 30 years. It's June 21, 2034. If you're old enough (maybe lucky enough) not to be around then, here's what your children and grandchildren might see:

• A nation overwhelmed by the needs and demands of a full third of its population — 77 million baby boomers reaching very old age.

• Social Security is a pay-as-you-go program, with younger workers supporting retirees. A huge glut of retired boomers are living on Social Security, with a drought of working-age taxpayers paying their benefits. In 1950, 16.5 workers covered each retiree's benefits; by 2030, the ratio is 2 workers per retiree.

• A catastrophic increase in taxes to cover a $45 trillion debt (from decades of deficit spending, a low birthrate, and what boomers were promised from Medicare, Medicaid and Social Security) or a decrease of similar magnitude in benefits.

• Sky-high interest rates and inflation.

• High unemployment and crime.

• Rampant political instability.

Information Liz Taylor on TV: On Friday, "Grower Older" columnist Liz Taylor will join KCTS-TV's "Serious Money" program at 8 p.m. for a panel discussion on long-term care.

It's not a pretty picture, but one that's predicted in a persuasive new book that makes the causes and the reality crystal clear. It's "The Coming Generational Storm: What You Need to Know About America's Economic Future." ($27.95, The MIT Press) by Laurence J. Kotlikoff and Scott Burns.

Kotlikoff, a professor of economics at Boston University and a research associate of the National Bureau of Economic Research, has spent his career studying these issues. Burns is a nationally syndicated financial columnist with the Dallas Morning News and a founder of the National Taxpayers Union.

To correct our course, they say, requires horribly painful and unpopular measures immediately: Raise federal income taxes (individual and corporate) by 69 percent, raise payroll taxes by 95 percent, or cut Social Security and Medicare expenditures by 45 percent — permanently.

And offend today's never-seen-a-tax-they-liked voters? Hardly. In fact, writes Newsweek's Robert J. Samuelson, "Republicans and Democrats will gladly worsen tomorrow's problems to win more of today's votes." When President George W. Bush pushed through his Medicare drug benefit, the Dems criticized it for not being generous — aka, expensive — enough. Politicians, like voters, can't see past their noses.

Yet every year that goes by without some effort to reverse this mess promises to lay waste to our future. The reason delay matters is the accumulation of interest. Waiting 15 years to start dealing with today's $45 trillion problem, say the authors, transforms it into a $76 trillion problem.

The three main culprits behind this "perfect demographic storm" are snowballing federal deficits, the phenomenal "age wave" of boomers expecting Medicare and Social Security to pay their retirement bills, and a dramatically shrinking birthrate that promises few new taxpayers to pick up the slack.

Q: Which population group is growing the fastest?

A: Those 85 years and older. Between 2000 and 2050 the 85-plus population is expected to grow from 4.5 million to 18.2 million. People between 75 and 84 will double, from 12.3 million to 25.9 million.

If your eyes cross trying to absorb these numbers, focus instead on their implications. In no time flat, there will be a massive redistribution of income from young and future Americans — our children and grandchildren — to those who are currently living. Like it or not, this country's economic safety net will have to be cut or taxes raised, or both. The system is not sustainable.

Think there's another country to escape to? Try again: "The problems we face are mild compared to those of many other nations," the authors report. The hardest hit — in fact, already being crushed by the weight of significant longevity and lower birthrates — are Europe, Japan and China.

Think Kotlikoff and Burns are alone in their sky-is-falling scenario?

At least two recent publications offer similar forecasts: "Restoring Fiscal Sanity," edited by Alice M. Rivlin and Isabel Sawhill ($15.95, Brookings Institution Press), and "The Age Explosion: Baby Boomers and Beyond" in the Harvard Generations Policy Journal at www.genpolicy.com. Liz Taylor, a specialist in aging and long-term care, counsels individuals and teaches workshops on how to plan for one's aging — and aging parents. You can e-mail her with questions at growingolder@seattletimes.com or write to Liz Taylor, The Seattle Times, P.O. Box 70, Seattle, WA 98111.

Copyright © 2004 The Seattle Times Company

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