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To print article, click Print on your browser's File menu. Go back Posted 7/5/2004 |
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Related Sites The Social Security and Medicare Trustee reports for 2004 Check current total government debt |
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Extra $8.6 trillion bill sent to future generations With the 2003 tax cut and a huge prescription drug benefit, the folks in Washington ran up an unprecedented bill they'll leave to future taxpayers. By Scott Burns It could probably be shown by facts and figures that there is no distinctly native American criminal class except Congress.
I'm serious. Let's limit the evidence to two pieces of legislation enacted last year. The first was the Jobs and Growth Tax Relief Reconciliation Act of 2003, passed last May. It provided a major tax cut for current taxpayers. That's not something one normally associates with a threat to liberty. The second was the prescription drug bill. It was part of a major overhaul of Medicare passed in November. Most people don't think of prescription drugs as a threat to liberty, either. But consider the two bills together. They work to maximize income and benefits for those living (and voting) today by sending a gigantic bill to our children and grandchildren. This is not political hyperbole. You'll be amazed at the burden our politicians dropped on the kids in a single year. Think trillions.
We're talking about an obligation that is greater than Social Security's unfunded liabilities. Measured against another benchmark, this new obligation is greater than all publicly held government debt -- plus the entire Social Security trust fund. Of course, estimates are just that: estimates. Tweak an assumption here and a variable there, and you'll get a different number. What's truly important is who's benefiting today. And who's getting the shaft tomorrow. Borrowing money to cut taxes Prior to passage of the tax cut, the Congressional Budget Office estimated the 10-year cost at $550 billion. A revision in late May reduced the figure to $350 billion over the same period. Left-oriented organizations such as Citizens for Tax Justice proclaimed the cost would be more like $1,575 billion -- plus interest on new government debt. Whatever the cost, much of the benefit went to high-income people. Some see this as a terrible injustice, forgetting that high-income people pay most of the income taxes. After all, you can't cut taxes for people who don't pay them. The problem with the tax cut isn't that it was for the affluent. The problem is that the tax-cut money was borrowed from our children and grandchildren. Tax-refund checks are written on the U.S. Treasury. The Treasury covers them by issuing more debt, foisting an obligation on future taxpayers. Drug benefit costs $8.1 trillion Sadly, the tax cut is a minor problem compared with the expected cost of the prescription drug benefit. In their report for 2004, the Social Security and Medicare Trustees estimate the 75-year general revenue cost of the new benefit at $8.1 trillion. (The number is on Page 108 of the Medicare report.) Those are present-value dollars. It's the amount of cash the Treasury would need in hand, today, to cover anticipated costs for the next 75 years. How much is $8.1 trillion? Well, the same trustees estimate the unfunded obligation of the Social Security retirement and disability program at $3.7 trillion over the same period. The new prescription drug benefit has, in one step, added a cost in future taxes that is twice as great as the liability Social Security has developed in 69 years of operation. The prescription drug bill liability is also greater than the combined total of all publicly held Treasury debt ($4.2 trillion) and the entire Social Security Trust fund ($1.5 trillion) -- a total of "only" $5.7 trillion. Democrats wanted a smaller tax cut and a larger prescription drug benefit. Republicans wanted a larger tax cut and a smaller prescription drug benefit. What we got was their idea of political compromise -- a new obligation for future taxpayers, enacted in a single year, of about $8.6 trillion. It's the biggest tax increase in history, reserved for our kids. See Scott Burns' Web site. |
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