For young people today, who are often saddled with educational debt and yet are still unemployed or underemployed, Tax Day can be especially painful.
But if mailing a check to the IRS for state and federal taxes isn’t bad enough, Millennials today are also stuck paying the bill for entitlement programs that might be bankrupt long before they even qualify to redeem them.
The nation’s Social Security and Medicare programs are in desperate need of repair. As the 2012 annual report by the Social Security and Medicare Boards of Trustees revealed, the country’s Social Security Trust Fund will be completely exhausted by 2033, when expected revenues will provide for about 75 percent of scheduled payments. To put it into context, the oldest of Millennials will be a mere 51 years old.
Medicare is already paying out more than it receives annually, and Social Security will follow suit in 2016. As a result, when today’s youth reach retirement, they will have paid more to entitlement programs than what they will receive – a negative return on their investment.
And while most people agree that the current path of Social Security and Medicare is unsustainable, the issue of how and when to fix these entitlement programs is more contentious. President Obama’s fiscal 2014 budget includes a switch to chained consumer price index (CPI) — a more accurate way of measuring cost of living — that would save Social Security billions of dollars over the next decade. This provision of the President’s budget is perhaps the only one that Republicans in Congress support, and House Speaker John Boehner (R-Ohio) applauded Obama for including that in the proposal during during his press conference last week. However, the proposal has enraged the Democratic base and powerful chained CPI opponents such as AARP and AFL-CIO who hold sway over Congressional Democrats.
If Congress decides to avoid moving to chained CPI, entitlement reform is unlikely to occur until after the next federal election, given that Democrats have repeatedly rejected Rep. Paul Ryan’s (R-Wisc.) entitlement reform proposals to start privatizing Social Security and Medicare. By allowing older Americans to choose their own healthcare plan that the federal government will help pay into, as Ryan proposed in his 2013 budget plan, and not force Medicare on them, it will lighten the load on the federal treasury and keep the government solvent enough so that future generations can benefit as well.
The brightest possibility for today’s young people would be a conversion of Social Security and Medicare into personal retirement accounts, instead of robbing the young for the sake of the old. Unfortunately, however, the political realities in Washington make even that common-sense change unlikely.
Happy Tax Day to America’s youth.
