Time to Cut Baby Boomer Benefits
The nation's chief financial watchdog, Federal Reserve Chairman Allen Greenspan, has warned that the country faces "abrupt and painful" choices if the Social Security and Medicare benefits promised to baby boomers are not quickly trimmed. In a call for honesty, Mr. Greenspan stated, "As a nation, we owe it to our retirees to promise only the benefits that can be delivered."

Chairman Greenspan emphasized the need for quick Congressional action to reduce benefits so that the affected stakeholders have the opportunity to make appropriate financial planning decisions. The Chairman explained, "If we have promised more than our economy has the ability to deliver, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels."

The news media noted that the "looming crisis in Social Security and Medicare has received little attention in the presidential race, although the programs will likely present the next president with painful choices." The report goes on to state that "Neither President Bush nor Democratic presidential candidate John Kerry has offered a detailed prescription for bringing sufficient money into the program."

A Business Week Online article recently noted that the "2004 Social Security and Medicare Trustees reports offer a sobering calculation of the unfunded liabilities of the two big entitlement programs. The unfunded liabilities are the excess of promised benefits under current law minus revenues from dedicated payroll taxes--or $72 trillion in off-balance-sheet obligations, the bulk of which stems from Medicare." [Emphasis added]

Candidates for various political offices are focusing on a variety of issues ranging from the serious to the trivial. However, relatively few politicians are willing to forthrightly address the impending crisis in unfunded social benefit obligations. Winston suggests that, instead of declaring fealty to the current unsustainable level of benefits, political leaders need to propose and implement realistic solutions to reform a social benefits system that, one way or another, will undergo significant change. Winston also suggests that the Boomers and post-Boomers make sure that their own financial planning takes into account the inevitable changes in federally-promised benefits.