Stealing From Your Kids

Have you ever had a stupid argument with someone you find to be, most of the time, very intelligent? Have you ever just shaken your head in disbelief that an otherwise rational person could hold that point of view?

This is the way I feel when I talk about Social Security and Medicare with people, particularly those who are current recipients.

Do they get the fact that their level of benefits, and the level promised to the millions following them in the next few years, is one of the major problems facing this country?

Do they get that their demand for a payment well beyond anything they contributed must come from the labor of their children?

Of course they do. They must, as the facts are so obvious. But it’s okay, because they are “entitled.” After all, these payments are called “entitlements” for a reason, right?

The problem is that the governrnment set up a program that was sound, then voted in changes that are terribly irresponsible. So now we are left with a stream of payments we cannot afford… unless we are willing to keep stealing from our children…

Medicare is running a deficit, and will continue to do so for the foreseeable future.

Social Security is not far behind.


The two programs are “pay-as-you-go,” meaning payments from current workers go mostly to pay for the benefits of current retirees. This works well as long as the pool of workers is growing faster than the pool of retirees.

Hmmm. Houston, we have a problem…

Not only have we voted in cost of living adjustments that boost payments, but we also have high numbers of Baby Boomers retiring, skewing the worker/retiree relationship.

We don’t have enough to pay for what we’ve promised.

The governrnment botched the program.

So when did we first find out about this? Last year? Five years ago?

Nope. We discovered the catastrophic flaws four decades ago! Ignoring for a moment that when Social Security (in the ’30s) and Medicare (in the ’60s) were passed there were dissenters pointing out the dangers, it was the early 1970s when the loud bells started going off.

What did we do?

Not much.

There were some adjustments, with taxes for Medicare and Social Security going up, but even in the early 1980s the governrnment realized there was a long-term problem funding the benefits. The thing is, there’s no political will to fix it.

This raises an interesting question. For 40 years, where have the recipients been? Where are the older, wiser members of our population, the very group that should be screaming for benefits to go DOWN? Shouldn’t this group of people, in an effort to lessen the burden on their children and grandchildren, be demanding lower benefits?

Ha! Those people are few and far between. Instead, the whole idea that entitlement recipients should be working to have the payments reduced is seen as ludicrous. Who would turnrn down the money? Indeed, who would not demand more?

And therein lies the problem.

If I told a retiree that their Social Security and Medicare payments will come from the U.S. governrnment, chances are he won’t care too much. If I said the system is changed, and now they must collect it directly from their kids and grandkids… well, that would be more interesting.

Even though everyone knows where the money comes from, no one seems willing to connect the dots and then refuse the money.

It is understandable. For all of their working lives the Greatest Generation (also known as the Bob Hope generation) and now the Baby Boomers have been told that Social Security (and later Medicare) is theirs… That they “paid in” and now they can “take out.”

Of course nothing of the sort happened. These are not savings accounts or IRAs. They are governrnment-administered tax-and-spend accounts.

As we increasingly realize the implications of this situation we all understand the problem, but no one – and no group – wants to be the one to stop the madness.

So we all keep going, hoping that, as if by magic, the situation will correct itself. And every day we push a little more burden on to our kids’ and grandkids’ shoulders. But it’s okay. It’s just a little more.

While there is no “fix” for this on the horizon, you can help your kids and grandkids side-step at least part of the problem. Introduce them to tax-free or tax-deferred investing. Look to things like municipal bonds and insurance.

For whatever reason, people tend to think of these options as “old man” investments. But if trying to lower my tax bill – and take me out of the crosshairs of the IRS in the years to come – makes me an old man, then call me grandpa. In fact, call me what you want, just take your hand out of my wallet to pay for an ever-increasing social burden.




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