We won’t save money by cutting education
By David Callahan
The views expressed are his own.
Nearly every day, if not every hour, some politician proclaims that taming America’s budget deficit requires “hard choices.” Strangely, though, few talk about perhaps the toughest dilemma facing the supercommittee, and the rest of Congress: How to reconcile the needs of old and young Americans.
Both groups have urgent and growing claims on the public purse. Four million seniors live below the official poverty line and millions more hover just above that line – contrary to the popular image of well-heeled retirees. And because the Baby Boom generation hasn’t saved nearly enough for retirement, such hardship is likely to get worse. Deficit hawks talk about cutting Social Security benefits and limiting Medicaid payments for nursing homes, but the truth is that seniors will need a more generous safety net in coming decades than what the U.S. now has.
Meanwhile, a new report on the “State of Young America” by Demos (where I work), argues that America is way under-investing in the next generation. Too many young people who graduate from our under-funded public schools aren’t ready for college and can’t earn a living in today’s low-wage economy. Those who do go to college often can’t afford to finish their degrees, and debt among college graduates has soared to record levels. Young adults trying to start a family also struggle with sky high costs for childcare, housing, and healthcare. At the same time, median earnings for young adult men with college degrees have barely budged since 1980.
The old and the young both need more help from government, even as public dollars grow scarcer. Squaring this circle, though, is not as impossible as it seems since the fates of the young and old are closely entwined. In particular, affording a strong future safety net for seniors will require that the generations coming up have the education and job skills to be highly productive workers.
In 1965, there were four workers paying into Social Security for every retiree drawing benefits. Today the ratio is 3 to 1. And a few decades from now, there will be just two workers supporting every retiree. If tomorrow’s workers aren’t darn good at creating wealth, entitlements for seniors will really be in trouble. A key way to ensure such productivity is by investing now in education.
This may be an elementary point, but it’s not so obvious as to actually shape public policy. The conservative drive to downsize government makes little distinction between types of public spending. Investments to build the human capital of the next generation are on the chopping block along with spending on the physical capital that is also needed for wealth creation. While conservatives at the national level decry Pell Grants as “welfare” and dream of abolishing the U.S. Department of Education altogether, anti-tax extremism at the state level is starving public universities and driving tuition beyond the reach of many young people.
Higher taxes would solve part of the dilemma facing Washington. For example, simply letting the Bush tax cuts lapse at the end of 2012 would bring in nearly $4 trillion over the next decade – cutting the deficit by far more than plans now debated within the supercommittee that would reduce spending on both the young and the old.
Even with higher taxes, though, some triage among generational priorities would be inevitable, and elected leaders need a framework for managing these choices. Stressing the interdependence between the young and the old is appealing because it doesn’t posit a zero-sum competition for resources. The more we prepare young people to be productive and create wealth, the more we will shield seniors from hardship down the line.
While the interest groups and politicians looking out for older Americans are understandably hostile to entitlement cuts, they need to formulate a more subtle and far-sighted position. The right set of priorities here would bolster protections for the most vulnerable seniors – fortifying us for the coming tsunami of indigent aged boomers – while also investing more in the economic success of younger Americans. To the extent that higher taxes and program reforms can’t cover the tab for such spending, affluent seniors should be asked to give up some of the benefits they don’t need.
America remains a very rich country. We should be able to both nurture the young and protect the old. And while the supercommitte isn’t the place to fashion an enlightened new approach to generational equity, it can at least move this conversation in the right direction. Not only should education cuts be off the table as a way to reduce deficits, but the supercommittee should be looking to increase how much America spends developing human capital.
Without such investments, any solution to our fiscal challenges will only be temporary.
PHOTO: Members of the Occupy Boston movement are joined by students from local colleges and universities are they demonstrate against the cost of education in downtown Boston, Massachusetts November 2, 2011. REUTERS/Brian Snyder