Taxation without representation

As rosy as both political campaigns would like America to believe the future of our economy is, it is in fact a slumbering dragon that neither party dares disturb lest they be devoured. But the dragon grows hungry even as it sleeps. It will be awakened by its hunger within a decade. Unfortunately, Bush is no Saint George, and Kerry is no Bilbo Baggins.

The beast was born after World War II when the baby boom created an inevitable Social Security and Medicare crisis. Over the past 60 years, it has matured. Why, then, did President Bush strengthen the dragon with fire breath in the form of his 2001 and 2003 tax cuts, especially when we have a more pressing use for firepower?

A recent study by Peter Orszag and William Gale of the Brookings Institution and Allan Auerbach of the University of California at Berkeley shows that by 2014, the cost of Bush's tax cuts, if made permanent, would reach a whopping 2 percent of the Gross Domestic Product (GDP), equal to the combined predicted Medicare and Social Security budget shortfalls. Gale goes on to predict that, in the future, "spending on Social Security, Medicare and Medicaid alone is anticipated to exceed 19 percent of GDP." The entire federal budget has hovered around 18 to 19 percent of GDP since World War II, meaning that over that period, 18 to 19 percent of the United States' earnings have been spent by the government. This, in turn, means that the overwhelming cost of entitlement programs — due to an aging population, rising medical costs and longer life expectancy — will reach the size of the current federal government, a spending proposition no politician is ready acknowledge, let alone deal with.

If Bush had chosen to follow Clinton's example by paying into the Social Security and Medicare trust funds and the economy had continued to grow, then, with a bit of luck, we might have been able to save these entitlement programs until the class of '08 decides to retire. But four years, two tax cuts, two wars, 1.6 million private sector jobs and the largest deficit in our country's history (according to the Congressional Budget Office) later, our choices have been narrowed down to two.

Option one would be to cut benefits, raise the retirement age or, heaven forbid, raise taxes and maybe all of the above. But with an aging electorate, that seems about as likely as Bush becoming a born-again Zen Buddhist. What seems much more likely is that the class of '08 will have to pick up the slack.

Bush touts his proposed personal retirement accounts, which would allow workers to individually invest their would-be Social Security taxes, as a second option and solution beneficial to young Americans. But the so-called "transition costs" mean that someone will still have to make up for the shortfall in covering aging baby boomers — someone being the class of '08. The youth of America would end up paying twice, once for themselves and once for their parents.

But no matter who pays, the entitlement costs of aging baby boomers will still be there and be a gigantic drain on the economy. With an enormous national debt, budget and trade deficits, the growing strength of foreign currencies such as the Euro, economic growth in Asia as well as mounting costs in Iraq, the continued dominance of the dollar seems improbable. Our rising debt makes us less competitive against foreign markets and results in lower across-the-board household incomes. Without a rapidly growing economy, there is no way younger generations can expect to pay for their parents' retirement while still saving for their own.

"The administration has still not released an analysis of the plan's long-term economic effects or even a statement of how it intends to pay for the tax cut," according to Orszag and Gail. But John Kerry's plan doesn't add up either. He proposes that by reversing some of Bush's tax cuts, cutting taxes for the middle class and stimulating the economy, he can generate enough revenue to fully fund Social Security and Medicare without further reforms. The problem is that it's too little too late; after four years of Bush, it takes a lot more than nostalgia to clean up the mess.

But this isn't Bush's problem. This isn't Kerry's problem. It's the class of '08's problem. No wonder our youth are so cynical. A country can only procrastinate for so long, and our time is up. But on the eve of an economic crisis, increasing the deficit is not the answer. Kerry was right to call Bush's economic policy a "birth tax." A great fire is coming, and today's children will be taking the heat.