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The United States is hugely in debt, and most Americans, excepting Paul Krugman and his liberal cohorts, think we should do something about it. President Barack Obama and most members of Congress agree that the deficit is a danger to the financial stability of the country, and offer, among them, many different combinations of program cuts and tax increases to help bring the deficit down. However, few of them are willing to push for substantial tax increases, on the one hand, or, on the other, substantial cuts in spending for national defense and the "entitlements" of Medicare and Social Security, and it is only in those areas, which comprise some 90% of the federal budget, where cuts will make any significant difference. Cutting spending on welfare and foreign aid and reducing "waste," as is often proposed by Rush Limbaugh and his conservative cohorts, will have about as much effect on balancing the budget as walking a mile a week will have on improving your health. But with terrorist threats occurring in all parts of the world and the Middle East in seemingly eternal turmoil and China and North Korea often behaving in vaguely sinister ways, reducing expenses on national defense is a tough sell. And, given the fact that a majority of our voting-age population is over 45 and madly in love with Medicare and Social Security, politicians who want to get re-elected are not, without prodding, going to propose any serious cuts in them.
Does that mean that in the next few years nothing much is going to be done to reduce the deficit, aside from a little nuisance tax added here and a little program nicked there? Probably. Nevertheless, as a 71-year-old who has been living comfortably off of younger generations for the past 18 years, I'd like to offer my thanks to them, explain how I came to be in my happy situation, and suggest what we seniors should be saying to our elected representatives.
Through a combination of frugality and good fortune, I was able to retire at age 53, in accordance with a plan I conceived when I was 30. Judy retired at 62, also in accordance with the plan (in the interest of staying busy, she was willing to work longer than I was). We certainly never made a lot of money--my highest salary as teacher and coach was $55,000, which I received only in my last two years of work; Judy's highest, again only in the last few years of her career, was $25,000--but we were willing to forego financial gain for freedom. I worked 185 days a year, enjoying those wonderful long summers off plus shorter breaks during the school year, and Judy worked four days a week at most, with frequent periods off while her dentist bosses vacationed. We had homes with Puget Sound views, we took some trips, we played some golf, we enjoyed some meals at good restaurants, we went out for coffee, but we didn't spend money accumulating a lot of things. As a result, we were able to put away toward retirement about $175,000 in IRAs and annuities. (I tried investing in the stock market, but got out after just a few months when I found that I didn't have the stomach for it. A drop in the value of any stock we were holding would knock the wind right out of me. We also purchased a second house to rent out for income and use as a tax write-off but found that urgent calls to replace a leaking hot water heater or to repair shotgun-riddled doors and woodwork resulting from thieves breaking in to rob what turned out to be our drug-dealing tenants was every bit as painful We cut our losses and sold the thing after four years.) The plan was to live off of Judy's earnings plus my Washington State Teachers' Retirement System pension of $32,000 annually, tap into the IRAs and annuities at age 59 1/2, then draw Social Security at age 62, the earliest we possibly could. The plan worked. In fact, we found that we didn't have to tap into those IRAs and annuities at all. (And the money that we inherited from our parents--after taking out $45,000 to pay off a mortgage--went into annuities as well, where it remains, essentially untouched. It's there for emergency, disaster, legacy, or possibly even a whim. We have no debt. We paid cash for the new house that we built in Arizona and for the new cars that we've acquired since being here; we pay our credit card bills in full every month. We could pick up a time-share condo or small second home or a boat or an RV, but those things bring complications and we like to keep life simple.) Why did the plan work? In small part, because of our foresight and frugality; in larger part, because our children have been self-sufficient, our parents were able to care for themselves until their deaths, and, so far, we have not had any major on-going health problems ourselves; in largest part, because of the generosity of the generations behind us in paying for my pension and continuing to "entitle" us with Social Security and Medicare.
How generous have those generations been? I have been retired for 18 years and have so far received some $576,000 in payments from the WTRS, which is far more than I and my employer, Edmonds School District 15, ever put into the system. Supposedly, the WTRS invested the contributions that the District and I made and has been paying me out of the appreciated funds ever since. In reality, it's the generations behind me which are liable and which have been making contributions and paying taxes to support me since 1993. Judy and I together have received $248,400 from Social Security since we became eligible to draw money from that program nine years ago. If we haven't already, we will soon be getting more from the system than we and our employers put into it. Again, our contributions were supposedly going to be put into a lockbox and invested. However, we all know that never happened. In reality, long before we retired, our contributions were spent by the federal government on all kinds of other programs and projects, leaving the generations behind us to pay for our security blanket. In 2011 the federal government will have to borrow $90 billion to make up the difference between the income from payroll taxes and the outgo in benefits for Social Security and Medicare. This problem will only worsen, as more retirees are supported by fewer workers (every eight seconds for the next ten years, someone from the Boomer generation will turn 65). In our case, for the past six years, Medicare has borne the brunt of our health care costs, which are rising as the years go by and we develop more physical ailments. In 2010, for example, I belonged to Health Net's Medicare Advantage plan. I spent three days in the hospital with pneumonia. The total cost for the stay, the treatment, and a variety of tests (MRI, CT scan, ultrasound, and blood) was $30,000 (although the hospital accepted the $21,000 that Health Net was willing to pay). My bill from Health Net? $550. On other occasions during 2010 I also had an angiogram, three EKGs, a colonoscopy, a Mohs surgery, four visits to emergency rooms, 16 visits to my family physician and to specialists, another MRI (suspected torn rotator cuff) and CT scan (checking on an encysted kidney), yet another CT scan (checking for aneurisms and a possible clogged carotid artery), another ultrasound (checking on a possible hernia), at least another dozen X-rays (checking on a problem that turned out to be polymyalgia rheumatica), another dozen blood tests (checking on thyroid output and blood thickness levels), and monthly refills of six prescribed drugs. My total out-of-pocket expenses, including my share of the hospital bill and monthly premiums for the insurance plan: $1,667. I'd say I got my money's worth. Unfortunately for them, I may have gotten my grandchildren's worth, too!
It's certainly quite possible that not all of the tests I underwent were necessary. The media frequently present reports of studies suggesting that certain tests--mammograms and colonoscopies, among others--are given too often and also suggesting that drugs can be just as effective in some cases as heart surgeries. We know that the medical community often orders tests both to make money and to protect against law suits, and we know that the bulk of the money spent on health care comes in the last year of one's life. However, few of us are willing to say no when a doctor recommends a test, and few of us are willing to say no to expensive treatments for ourselves or our elderly parents even when it's clear that the end is not far away. Rationing may be rational, but few of us want one of Sarah Palin's chimerical "death panels" to rule on who deserves to receive care. But if we want coverage until the moment of death, we need to make fiscal changes.
Now, I'm not about to unilaterally request that the State of Washington or the federal government reduce the amount of money they pay me annually, or to offer to pay more myself in taxes or Medicare premiums. (In fact, in the interest of full disclosure, let me confess that for 2011 I switched from Health Net to SCAN because SCAN requires no monthly premium and only slightly more expensive co-pays.) I'm not willing to pay more than anyone else in my age or income brackets does. But, for the sake of generations behind me, changes must be made, and all ages and income levels need to participate in the sacrifices. Believing that our society needs to move towards a pay-as-you-go philosophy, I suggest the following:
An additional contribution of five percent of their salaries by all government employees and military personnel who are eligible to receive pensions.
An extension of the payroll tax to all income (not just the first $107,000) earned from jobs held.
Pushing back by two years the ages at which one may begin receiving Social Security.
Reducing by 10 percent the amount of money paid by Medicare to private insurance companies to manage the Medicare Advantage plans, which would have the effect of forcing them to raise (by 10 percent or more, no doubt!) premiums or co-pays for policy holders.
Requiring military members to pay an additional five percent for their health care premiums.
Eliminating Social Security cost-of-living raises, except for those whose incomes are below the poverty level, for the indefinite future.
Instituting a federal Value Added Tax of two percent on all goods and services.
Adding a five percent surtax to all earned income over $250,000 annually.
Eliminating the mortgage deduction on second homes.
Making a serious reduction in the 1,000 military installations that the U.S. has on foreign soil.
Making a serious reduction in the number of aircraft carriers the U.S. maintains.
Withdrawing our military forces from Afghanistan and Iraq (in 2011, spending on the war in Afghanistan and the "stabilization" of Iraq is projected to reach $170 billion).
Engaging in no additional nation-building.
Ending subsidies for agriculture in general and tax breaks for ethanol production in particular.
Ending research and development tax breaks for oil companies.
Some of these suggestions may be rash; many are probably politically impossible. But for the sake of generations to come, these are the kinds of painful measures we need to be talking about taking now. With a little discipline and a lot of luck, Judy and I have been able to enjoy a moderately comfortable retirement. Would that my grandchildren could have a similar experience.
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