Nancy Pelosi isn’t just the first female Speaker of the House; she’s also the first grandmother to serve as Speaker. After being handed the gavel, Pelosi invited her grandchildren up to the podium, while imploring fellow Members: “Let’s hear it for the children. We’re here for the children.”
While Speaker Pelosi’s talk about “the children” may be political posturing, she’s actually making an important point: Policymakers should evaluate policies based on how they affect future generations. America would be better off if policymakers focused on their decisions’ long-term affects, rather than their impact on interest groups and the next election.
Speaker Pelosi should begin her analysis by looking at one of the federal budget’s leviathans: Social Security. This program has been referred to as a “generational compact.” Young people are supposed to happily hand over their payroll taxes that are used to pay Social Security benefits to today’s senior citizens, knowing that they’ll be able to demand the same from the next generation. Think of it as a kind of generational hazing.
The problem is that Social Security’s demands are becoming increasingly severe. When Nancy Pelosi graduated from college in 1962, payroll taxes to support Social Security were 6.25 percent on the first $4,800 of income, for a maximum tax of $300 per year. Today, Social Security’s walloping tax rate of 12.4 percent applies to the first $97,500 of income, for a staggering maximum tax of $12,090. For most Americans, Social Security’s payroll tax is the largest they pay.
Unfortunately, things are only getting worse. When Speaker Pelosi’s youngest grandchild (born just as the Democrats were taking over Congress) turns ten, Social Security will be taking in less from payroll taxes than will be needed for benefits. Social Security then will turn to its so called “trust fund,” which simply means that Social Security will demand a portion of general tax revenues to supplement payroll taxes. By 2040, when the Speaker’s 33-year-old grandchild will likely be entrenched in the workforce and trying to raise Pelosi’s great-grandchildren, Social Security will require the equivalent of 17 percent of payroll, or taxes nearly 40-percent higher than they are today.
Social Security is, of course, just the beginning of the problems with costly government programs facing the next generation. The federal healthcare program for the elderly, Medicare, faces an even more precarious financial future. The combined costs of entitlement programs for the elderly will boom in the coming decades, consuming a greater portion of the federal budget and leaving the next generation with a potentially crushing tax burden.
Responsible, forward-looking leaders would take this looming problem seriously. Yet politicians — Pelosi herself chief among them — have viewed Social Security as a convenient political weapon, not a problem to be solved. In 2005, when the president launched his effort to place Social Security on firmer financial footing, then Minority Leader Pelosi didn’t simply critique his approach and offer an alternative. She sought to squelch debate and use the issue for political leverage. When pressed for when the Democrats would offer a Social Security reform plan of their own, Pelosi responded that they would offer a plan “never.” So much for thinking about the children.
One Democrat, Rep. Robert Wexler (D., Fla.), actually had the courage to propose a plan to fix Social Security. I heartily disagree with his approach — he relied almost entirely on raising taxes to address Social Security’s deficit — but it was an honest attempt to shore up Social Security’s finances. According to Time, Wexler was “chewed out” by Pelosi for his efforts.
Speaker Pelosi is not alone in preferring the head-in-the-sand approach to Social Security policy. Senate Finance Committee Chairman Max Baucus (D., Mont.) issued a press release “blasting” the president for including in his budget funds to create personal accounts within Social Security. Chairman Baucus recoils from anything that would change the New Deal relic into an actual savings vehicle for Americans, but also opposes raising taxes or cutting benefits as a part of Social Security reform. In other words, Chairman Baucus wants all options off the table.
This isn’t leadership. Speaker Pelosi, Chairman Baucus, and the others who now lead Congress cannot childishly pretend away real problems like Social Security’s financial future — at least, not without grave consequences for the future generations that they claim to want to protect. Speaker Pelosi, your grandchildren are waiting.
— Carrie Lukas is the vice president for policy and economics at the Independent Women’s Forum. She is the author of The Politically Incorrect Guide to Women, Sex, and Feminism.