Screwing Gen-X

My regular readers know that I'm a Gen-Xer (born 1967) who frequently looks at politics through a lens of generational politics and culture. So I think it's incumbent upon me to point out what I think is obvious but seems to be rarely, if ever, noted: entitlement reform is going to screw Gen-X royally.

Putting aside Medicaid, the other two big entitlement programs are Medicare and Social Security -- which are both, essentially, mechanisms for one generation to take care of the previous generation. The older generation, when they are 65 and older, receive the benefits, which are paid by taxes -- and the bulk of tax revenue comes from those who are in their prime earning years, in their 40s and 50s.

That's a nice social compact, in my opinion -- and in the opinion of most Americans.

There's a problem, however. Well, there's more than one problem -- others include increased longevity, and higher-than-inflation rise in health care costs. The former is essentially a permanent feature of the system; the latter is something we need to deal with regardless of anything else, for the same of the economy as a whole as well as the federal budget.

But the problem I'm talking about is that generations are not all the same size. In recent years, this has worked in the system's favor: the very large Baby Boomers have been in prime-earning years, making it relatively easy for them to take care of their predecessors. (It would have been nice if they had used that opportunity to build up a little nest egg in the system, but sadly they did not.)

We're beginning the transition now to the reverse situation. The first Baby Boomers turn 65 this year, while Gen-Xers enter (in theory at least) their prime earning years. Eventually we'll have my little cohort bearing the primary burden of paying for the huge Baby Boomer generation's benefits.

There's a light at the end of that tunnel: eventually the relatively numerous Millennials will be taking care of the dinky Gen-X group. But we have to get from here to there.

The solutions being offered -- aside from health care cost containment measures, as I mentioned above -- fall into two categories.

One set would increase revenues, by raising taxes: letting the "Bush tax cuts" for high earners expire; increasing payroll (Social Security) taxes; raising the cap on income subject to payroll tax; "removing complexities from the tax code," which essentially means raising taxes by eliminating deductions and exemptions.

The other set would decrease costs, by reducing benefits: raising the retirement age; means-testing; replacing Medicare coverage with capped vouchers (the Paul Ryan plan, expected to be passed by House Republicans today).

Almost without exception, all the plans to raise taxes call for immediate or near-term implementation -- just as Gen-X enters their prime earning years, during which they will bear the largest tax burden.

And almost without exception, all the plans to reduce benefits would be implemented well in the future -- just as Gen-X enters their retirement years, during which they will be the largest beneficiaries. (For example, the Ryan plan exempts anyone currently over age 45, meaning anyone born before 1966.)

As a member of Gen-X, I would respectfully suggest that this is totally bogus.

Mind you, I don't oppose all of the measures under consideration.

I also appreciate that some benefits changes should not be applied to those near retirement age -- it would be grossly unfair to change the rules at the last minute, for those who have planned their whole lives under a different set of assumptions.

But we all know that the real reason for postponing those benefits changes is because a gazillion Boomers would vote out anybody who tried to touch their own entitlements. And the reason we need to raise taxes immediately is because Boomers insisted on maintaining the lowest possible taxes while they were the prime earners.

The upshot is that all these plans ask Gen-Xers to give benefits to Boomers that we will not get for ourselves. The Ryan plan is the most outrageous example of this -- someone smarter than me should be able to calculate roughly how much more an average Gen-Xer will pay into Medicare, then he or she will get from it, over their lifetime under the Ryan plan -- but it's true of the others to some degree.

Oh well, we always expect to get screwed anyway. Party on, dudes.

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