The prospects for the young have not changed. The coming entitlement crisis that looms when the Baby‐Boom generation retires has not gone away, and as the Financial Times reported recently, the lead U.S. analyst for the credit‐rating agency Moody’s says that unless action is taken to bring spending under control in the next decade, the U.S. government may even lose its triple‐A credit rating. Social Security and Medicare still face massive financial shortfalls that suggest reduced benefits or painfully sharp tax increases.
Throughout their primary campaign, Democratic candidates generally ignored the coming senior‐entitlements train wreck — save for Barack Obama. He advocates the traditional liberal policy of resolving shortfalls by increasing taxes — in this case, by eliminating Social Security’s payroll‐tax cap.
Tax increases to fix entitlement shortfalls hurt younger workers more than older ones. Yes, those close to Social Security’s retirement age will also pay higher payroll taxes — for a time. Younger voters will pay more for a lot longer. Not only is the Baby‐Boom cohort of retirees in the Baby Boomer generation, medical progress ensures that they will live to riper and riper old ages. And yet the Boomers want the same benefits offered to seniors when they were footing the bill — despite the fact that they were paying for far fewer retirees.
That’s the 800‐pound gorilla in the Social Security debate. The Boomer generation doesn’t have a lockbox full of cash to pay for their more numerous and longer golden years: their children must pay for it — which is precisely why economist Thomas Sowell, in his book, Applied Economics, calls Social Security a Ponzi scheme.
Barack Obama’s policy would impose a 60‐percent increase in lifetime Social Security payroll taxes for some young voters. College‐educated workers would lose the most under his plan, since their future earnings are likely to remain above Social Security’s maximum taxable limit for most of their careers.