The budget deal last December was notable for its neglect of any reform to entitlements. The Obama years will likely be remembered for the utter failure to come to grips with our burgeoning unfunded obligations, which remain the greatest threat to our future. But don’t take my word for it. Here is the eloquent economist Caroline Hoxby:
Programs such as Social Security, Medicare and disability have needed reform for many years because they are not fiscally sound. They will predictably impose an increasing burden on the economy. Today’s young Americans will have to be heavily taxed when they are adults to pay for benefits mainly enjoyed by previous generations. This will discourage them from working and upgrading their skills, causing future growth to slow. Most economists have agreed year after year that these programs need attention, yet reforming them always takes a back seat to agonizing about the latest crisis—even when we know that such agonizing cannot help much and that we must let the economy re-equilibrate.
Sadly, reform seems further away than ever, as Republican presidential candidates are largely silent about the issue and Democratic candidates want to add to entitlements by increasing social security benefits. One reason for less serious talk about reform, let alone action, is simple: the baby boomers are either now collecting old-age entitlements or getting ever closer to the day they will do so. Politicians are leery of annoying this massive, aging voting bloc.
This issue highlights a little discussed danger for democracy—its last period problem. When people are young they have an interest in the nation’s long term future. But as they age, many become less concerned, because they will not be part of that future. This problem is not unique to democracy but besets any enterprise where some decision makers have shorter term horizons than the beneficiaries. Faculties are a case in point: I have long wondered whether the voting rights of professors should be whittled away as they approach retirement.
But democracy itself exacerbates its last-period problem. Older people vote in much greater percentages than the young. Voting is costly, and older people have less to do and less exciting ways to spend their time. The aged would thus turn out more, even if their benefits were not at stake.
And it is also exacerbated by modernity. Having children tempers the psychology of the last period, as children are a bridge to the future. But more people are childless and most have fewer children than in past centuries. And children tend to live farther away, reminding their parents less of their presence.
The last period problem of democracy has a variety of implications. First, it highlights the fact that democracy is no substitute for other restraints on government—restraints that have been eroded by progressivism. Second, it suggests the need for new restraints: a balanced budget amendment, for instance, might help prevent the old from sloughing off debts onto the young. Finally, it shows the folly of proposals to increase rather than pare back entitlements. Such profligacy will saddle the unborn with even greater impositions from which it will be difficult to escape.