Baby Boomers - The Real Cause Of Our High Taxes
Baby Boomers - The Real Cause Of Our High Taxes
If you tilt your head to one side and stand on one foot, you might see what some have seen - that Baby Boomers are the cause of our high and rising federal and State taxes. More importantly, Vermont may be the harbinger of what is in store for the entire nation over the next two decades.
Between 1946 and 1964, approximately 78 million babies were born and America would never be the same again. Even before the boomers began paying taxes, the government was spending a lot of money on taking care of them. More elementary schools were built in 1957 than any other year, before or since. In 1967, more high schools were built than any other year, before or since. From 1965 to 1975, 743 new colleges were opened and the college student population rose from 3.2 million to over 9 million. During this same time, the average school enrollment for all schools rose by more than 500%. All that cost a lot of money and started a trend that continued, as the boomers grew older. (1)
As the boomers moved into their peak earning years from age 24 to 55, the economy exploded and taxes poured into the State and federal governments. Annual federal budgets rose from $478 billion in 1978 to an estimated $2.5 trillion for the budget now being developed for 2008. (2)
More money came into the government coffers from other sources. In 1977, $39 billion excess dollars were paid into social security. By 2006, when the median age of the boomers was 51, the annual excess payments rose to $1.99 trillion. These excess payments are spent each year without regard for the future debt created to the soon-to-retire boomers – estimated to be $2.5 trillion per year by 2075. (3, 4)
Spending all that boomer paid tax revenue is what our government does best and they spent every last penny collected - $19 trillion between 1993 and 2003. Then they spent all the excess social security contributions – $14 trillion between 1993 and 2006. Then they continued to spend far more than was collected for 36 of the past 40 years - accumulating and additional $8.7 trillion in public debt.
This massive influx of tax revenue paid for more and more welfare, healthcare and entitlement programs and infrastructure changes. Today’s government paid (with tax revenue) healthcare has risen 700% from 1980 levels. Total annual welfare rose from 6,400% from 1965 to FY2005 costing cost taxpayers $8.29 trillion (in 2000 dollars). As the boomer tax revenue rose, the spending spree extended to hundreds of small programs. Dairy Subsidies rose 673% and soybean subsidies are up 501% between 1998 and 2003. (5)
All this available money has established a pattern of massive spending that has pervaded our government and our cultural attitudes for more than five decades. An entire generation has grown up with a lifetime of increasing benefits paid for by the government. History has shown that such spending attitudes have a momentum of their own. It is hard for our politicians to stop or even slow the spending. It is harder for the aging boomers to reassume the responsibility for paying for what has been provided by the government for their entire lives. So the spending continues.
The problem is that beginning now and for the next two decades, we will see the boomers moving out of their peak earning years and their peak tax paying years. Tax revenues will decline but those persistent welfare, healthcare and entitlement programs and infrastructure changes will remain, costing us long term commitments of increased administration, maintenance and operating costs. And soon the retiring boomers will compound the spending with demands for large increases for Medicare, Medicaid, Social Security, Veterans Assistance and other costs.
Vermont has one of the smallest and oldest populations in the entire US and will see more people retiring earlier than most states. Our unique demographics magnify this pattern of spending and make us more sensitive to the effects of lowered tax revenue and higher medical costs from the retiring boomers.
For a large and growing population, the burden of our taxes outweighs the benefits of the government programs. It will take a significant effort by our government to slow or reverse a generation of spending. It will take a larger effort for the public to give up on the extravagant, noble and excessive benefits of that spending – but we have to try.
References
1 Digest of Education Statistics, 1998, National Center for Education Statistics
2 Data from the Office of Management and Budget
3 Congressional Budget Office, Long Range Fiscal Policy Brief #9 July 1, 2003
4. Congressional Budget Office, Long Range Fiscal Policy Brief #2 July 3, 2002
5. Backgrounder Report #1710, Heritage Foundation, Dec. 3, 2003 by Brian Riedl