The purpose of this blog is to attempt to stir thought about important issues across the political spectrum, in hopes that some thought process might move a few people out of tribal political enclaves. With that in mind, I will start this piece with a few facts about which I hope most people can agree.
We face a major demographic challenge. All 80 million Baby Boomers will soon be drawing Social Security and Medicare. The birth rate has fallen to about 1.8; replacement requires 2.1 children per female of child bearing age. The number of workers in the labor force contributing money to support the welfare state is shrinking relative to the number of retirees being supported. The ratio will soon be 2/1. The Medicare Trust Fund (according to its trustees) will be bankrupt in 2030; the Social Security Trust Fund in 2035. Benefits will decrease by 25% or more without changes in the law. Barring some truly unforeseen and genuinely major event (war, epidemic, mass movement of immigrants, political upheaval) the future fiscal pain is inevitable.
Instead of setting aside reserves to cope, we enter this difficult demographic landscape deeply in debt. Federal debt is $21 trillion and will soon be increasing by $1 trillion per year. State and local bonds add another $4 trillion. Public sector pension shortfalls add another $6 trillion. In aggregate, that is over 150% of GDP.
There is no easy solution to the problem, but robust economic growth would be a big help. I calculate that the actuarial shortfall (difference between projected outlays and collections) over the next 30 years is $130 trillion. If our society could generate that additional wealth, we could pay the bill without cutting benefits or raising taxes to levels that would severely hamper the economy.
We are not dealing, in this instance, with rocket science. GDP growth has two components — more workers and more productivity. If we have enough additional people working and those people are producing more goods and services per hour, we generate more wealth that can be used to pay our demographic bill.
We should import more people. There are lots of people around the world who would like to live and work with us. We could set out to attract those who have knowledge/skills, and/or entrepreneurial plans, and/or investment capital. Several other advanced economies are already doing that. Their experience presents us with a great study in best practices. The construction and agriculture sectors need workers. Mexico and its southern neighbors have surplus workers. We should grant them work permits.
Mostly, however, our work force needs to be upgraded. Except for the hard sciences at college level, our education system produces results that can charitably be described as mediocre. In international tests, our students are invariable in the second tier or worse. A successful economy in the 21st century will be heavily dependent upon advanced technology and knowledge workers. We are woefully unprepared.
My first recommendation for change is based on an ideological conclusion you may find unacceptable. I believe that almost all progress is the result of competition. Human beings, for the most part and at least to some extent, are lazy procrastinators. The hot breath of competition gets them going. A government monopoly staffed by unionized workers is not a recipe for vibrant competition. Property owners all over our nation pay taxes (and surcharges and special surcharges) specifically to provide universal free education. They should get their money’s worth. Every child should be offered a voucher in an amount equaling about 75% of the current per student expenditure to be used to pay for any school which passes strict accreditation standards — non-profit, parochial, Christian, for-profit schools. Parents would have four choices —the local public school, a low overhead school willing to accept the voucher as full payment, a school that would offer a scholarship to their child to cover the shortfall, or paying full price at a private school by adding their own funds to the voucher. That system would motivate the unionized schools to compete for students and strive for excellence.
Second, we should examine the overhead. In many of our jurisdictions, administrators outnumber teachers. Expensive colleges lavish money on facilities, raising tuition inexorably, and producing debt slave graduates. Teacher pension plans, which badly need restructuring, are quietly sucking away revenue that should be spent educating children
Third, we should narrow the focus. Educators want to encourage environmental sensitivity, provide nutrition, sex educate, enrich, etc. We need to get back to basics. We need entering high school students who can read sophisticated material, write a coherent essay, and are mathematically literate at least thru geometry. There is also a fourth R — reasoning. Every child passed out of the eighth grade should know the fundamentals of the scientific method and basic logic. In high school, history, civics and rudimentary economics should be added to progress in the four Rs. We can’t have an informed electorate or work force without basic knowledge of government operations, historical context, and the law of supply and demand. Those wishing enrichment beyond the basics should be provided opportunities and facilities, but that is frosting, not cake. I would further assert that it is probably impossible to get satisfying frosting without the foundation of a cake.
Once a child is prepared to master material and work skills, we need to offer, via as many vehicles as possible, vocational training that comports with the economy as it is at the moment of training. There will have to be continuous coordination with the private sector to ascertain currently needed skills. The system should be designed for continuous learning, because today’s jobs will be gone tomorrow and all old dogs will be required to learn new tricks. Most of the students going to traditional universities should forgo the experience and learn a trade in order to make a living and stay out of debt. Universities can then offer enrichment opportunities on a part time basis to those seeking enrichment.
I firmly believe that there is a real possibility that we could sink to the bottom in a sea of debt if we don’t get our stuff together. We could easily become a third world country. With some fresh blood from abroad and some study on our part, we can avoid that fate.