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 real 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 74 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 in any other year, before or since. In 1967, more high schools were built than in 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 more than 9 million. During this same time, the average school enrollment for all schools rose by more than 500 percent. All that cost a lot of money and started a trend that continued as the boomers grew older.
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 $2.5 trillion for the budget in 2008.
More money came into the government coffers from other sources. In 1977, an excess $39 billion was 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.
Spending all that boomer-paid tax revenue is what our government does best, and it spent every last penny collected — $19 trillion between 1993 and 2003. Then it spent all the excess Social Security contributions — $14 trillion between 1993 and 2006. Then it continued to spend far more than was collected for 36 of the past 40 years — accumulating an additional $14.7 trillion in public debt.
This massive influx of tax revenue paid for more and more welfare, health care and entitlement programs, massive defense contracts and billions in pork-barrel projects. Today’s government-paid (with tax revenue) health care has risen 750 percent from 1980 levels. Total annual welfare rose 6,400 percent from 1965 to fiscal year 2005, costing taxpayers $8.29 trillion (in 2000 dollars). As the large income from the boomer tax revenues rose, the spending spree extended to hundreds of small programs. Dairy subsidies rose 673 percent, and soybean subsidies were up 501 percent between 1998 and 2003.
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 and free services 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 in 2011 and for the next two decades, we will see the boomers moving out of their peak earning years and their peak taxpaying years. Tax revenues will decline, but those persistent welfare, health care and entitlement programs and defense commitments will remain, costing us long-term obligations of increased administration, maintenance and operating costs. And soon the retiring boomers will compound this spending with their own demands for large increases for Medicare, Medicaid, Social Security, veterans assistance and other costs.
The boomers will also likely stop adding money to stock investments and begin to withdraw earned savings from the stock market. There is also likely to be a flood of large “empty-nest” homes put on the market as the boomers seek smaller homes and the use of their home’s equity to supplement retirement.
One other problem looms. There was a sharp decline in births after the contraceptive pill was introduced in the early 1960s, creating the lowest birth rate in the 20th century. That drop in population, earning power and tax revenue will occur at a time when the boomers are retiring and increasing their demands for government spending.
Vermont has one of the smallest and oldest populations in the entire U.S. 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 many of the benefits of the government programs. Continued deficit spending is not an option and the Bush-Cheney/Republican tax reductions, and huge increases in entitlement spending have only hastened and exacerbated the problem. What politician is willing to slow or reverse a generation of spending? Will the general public give up on the extravagant, noble and excessive benefits of that spending? Will you vote for a politician who is willing to cut spending? If not, then you are part of the problem.
Tom Watkins lives in Montpelier.
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