A Mystery Readily Solved

...Indeed, a common motive for Chapter 11 bankruptcy petitions is escape from pension and health obligations...

...As a consequence, analysts like Longman fall into the trap of defining their problem as the distribution of governmental expenditure burdens among average working families of different ages...

...If that were not bad enough, at a time when new jobs in hi-tech, computers and financial services demand skilled acolytes, our schools, community colleges and, alas, even four-year institutions confer certificates and diplomas upon the verbally and mathematically semiliterate...

...Not so very long ago, the United States was the world's largest creditor...

...While we spend lavishly and foolishly on health care, some 36 million of us are totally unprotected by either public or private insurance...

...In the near future, Congress will find itself compelled either to bail out ERISA or cope with the rage of retired workers deprived of their legitimate expectations...

...For average families living standards have been declining since the mid-1970s —a dreary statistic that is masked, in Bureau of Labor Statistics jargon, by the steady increase of the female labor force participation rate...

...To begin with the obvious, the best of statisticians is only slightly more likely to predict the future accurately than was Nostradamus, not to mention contemporary astrologers...

...Longman warns that the baby boomers are highly likely to be disappointed...

...We also offer no children's allowances, meager unemployment benefits and, Longman and others to the contrary notwithstanding, smaller pensions to retirees than the Germans and the Scandinavians...

...Our steady loss of ground to better educated, harder working, more selfsacrificing foreigners registers itself in painfully slow productivity gains, public perception of American products as lower in quality than imports, and an intractable international accounts deficit...

...We have the wherewithal to rescue Social Security, Medicare and Medicaid, and to inaugurate a national health system—which Longman, to his credit, advocates...

...In the private sector, some 235,000 employer-sponsored retirement plans cover approximately 40 million workers...

...Particularly as manual labor in factories and on construction sites continues to decline, older employees, given the chance, will prefer the status, income, sociability, and structure of work to the domestic tensions and other dubious joys of perpetual leisure...

...Worst of all, as baby boomers begin to retire in large numbers, circa 2020, the pension fund will lapse into deficit and then stagger into bankruptcy by 2054...

...and it would turn Social Security into one more welfare program, vulnerable to the breezes of political fashion and an occasion of shame to recipients...

...No wonder, at least in purely financial terms, that women's fertility has fallen below the 2.1 children per family needed to assure a new generation as numerous as the one that produced them...

...Longman makes a well-documented and generally well-argued case for a national shift in emphasis from indulgence of the old to nurturing young families...

...Strong as the Gray Panthers, the American Association of Retired Persons, and the venerable Democratic Representative Claude Pepper of Florida are in their generation, Congress in 1983 subjected some Social Security benefits to taxation, raised future retirement ages first to 66 and then to 67, and hiked Medicare premiums...

...Yuppies are merely a small, upwardly mobile fraction of the baby boom generation, and a serious recession will abruptly halt their ascent to riches...

...The relatively small cohort of baby boomers' daughters and sons will inherit the cost of the lavish promises made by their parents and grandparents to the elderly...

...Employee wages are now taxed at 7.15 per cent up to $43,800 and their employers are subject to a matching levy, actually a second subtraction from wages...

...At the national level, however, these choices become less anguished as available resources increase...

...Equity and efficiency dictate means testing Social Security benefits...

...Most of the women and men born between 1945-65 are worse off than their parents...

...Social Security mails monthly checks to 36 million Americans, most of them pensioners and the remainder either family survivors or individuals of all ages who are sufficiently disabled mentally or physically to require public support...

...The new emphasis on educational improvement may last long enough to generate an enduring positive impact...

...William E. Simon, who was Richard M. Nixon's Treasury Secretary, paid no Federal income taxes in seven of the last 10 years, a period that saw his net worth balloon from a mingy $2.5 million to an uncontemptible $200 million...

...Longman has written a provocative book, likely to accelerate a debate that politicians like Republican Presidential aspirant Pete du Pont have already shoved onto the national agenda...

...The fact is that the prosperous, the merely wealthy and the filthy rich do not pay their fair share of taxes...

...Longman extrapolates unwisely from the attitudes and politics of the 1980s...

...I do not dismiss chronological conflict...

...and curtailing public employee retirement guarantees...

...age rationing, after the British model, of expensive medical treatments such as organ transplants, hip replacements and kidney dialysis...

...It already has had to bail out a large number of schemes formulated by now insolvent corporations...

...He ignores the danger that means testing of benefits would shatter one of the few coalitions between the poor and the prosperous that has lasted for half a century...

...Members of today's labor force suffer these payroll taxes because they anticipate in their own golden years even plumper pensions than those currently keeping the incidence of poverty in the senior set lower than in any younger age group...

...Come contract time, union bargainers often must balance the interests of young and senior members...

...Many who now retire at 62 (the average age of withdrawal from the labor force) or earlier have been in effect laid off, excessed or unsuccessfully outplaced by reorganizing corporations...

...Disability funds will last to 2026...

...Bad enough...

...Furthermore, as Longman himself occasionally recognizes, the elderly are not invariably as self-centered as his economic mode of reasoning usually implies...

...The author's assumption that the trend toward early retirement will continue, for instance, is a questionable projection...

...By Western European criteria, our social outlays are notably ungenerous...

...percentage of Gross National Product...

...Reviewed by Robert Lekachman Phillip Longman looks at the American future and trembles...

...As the Reagan Administration discovered early on, this legacy of the New Deal is enormously popular among both the elderly and their aging adult children...

...The reason we encounter difficulty financing benefits as mean as these is not to be found in generational conflict but in the ancient war between rich and poor...

...We haven't asked the right people to contribute...

...Frequently unfunded, they have been guaranteed since 1974 by the Employment Retirement Income Security Administration (ERISA...

...In a more enlightened administration, the White House and Congress would look to the folks who are most lightly taxed of all for new revenue, the lucky Simons, Trumps, Helmsleys, Forbes, and Zuckermans...

...They could translate into higher values placed upon babies than upon Club Med vacations and new Porsches...

...and the recently introduced notorious regulations stipulating how long a person may be hospitalized for a particular illness, regardless of what the doctor thinks about that person's condition, expel hospital patients sooner and sicker...

...Its only partially funded civilian counterpart will have still larger liabilities, $537 billion by the author's estimate...

...Parents weigh immediate consumer pleasures against thrifty provision for the college education of young children...

...In his judgment present budgetary allocations, besides being unfair to young adults and still more to their progeny, also burden the economy and dim hopes of improved performance in the international marketplace...

...For several reasons better than my own antiquity (I was born in 1920), Longman fails to convince me...

...In the untidy Congressional budget process, advocates of funds for education, maternal health, day care, and Medicaid contest the playing field with the Claude Peppers...

...The emerging shortage of young workers just might stimulate labor saving investment in efficient machinery, robots and numerically controlled machine tools...

...Reaganomics—borrow and spend now, repay in the sweet by-and-by—has vastly stimulated a hedonistic culture that legitimates immediate gratification while correspondingly discouraging thrift...

...Fewer of them can afford their own house on its own plot of land, and those who do qualify for mortgages pay a larger part of their disposable income for less space than they were used to as children...

...We simply need to eliminate tax favors to developers (the 1986 tax reform act went some distance in this direction...

...impose Social Security levies on all income—salaries regardless of size, and into the bargain rent, interest and capital gains...

...Across the appropriate ocean, frugal Japanese, Koreans and Germans save and invest several times the U.S...

...His net worth, an estimated $250 million, improved a cool $50 million in the last two years...

...Longman confides even more depressing news...

...The unremitting propaganda of the Reaganites has apparently concealed from the public and the politicians that Americans are rather lightly taxed by world standards...

...One encounters more than an occasional illspoken holder of a doctoral degree...

...Although Longman's tale of intergenerational conflict over the allocation of scarce resources is superficially plausible, I believe the data lend themselves to an alternative, better interpretation that focuses less on the size of benefits than the way they are financed...

...A third of Medicare dollars or about one-twentieth of the nearly 11 per cent of the GNP swallowed by the health sector is expended on patients who die within a year...

...The entirely unfunded military retirement system will pay out $443 billion in the next generation...

...He cites Social Security Administration projections that the Medicare trust fund will be running a deficit by 1991, and will fall to zero by 1996...

...We now head the debtor queue, trailed by Brazil, Mexico and other Third World countries we routinely scold for their profligacy...

...and begin seriously to limit the transmission of huge fortunes across generations...

...Medicarecompensatestheelderly for less than half their costs, with Blue Cross-Blue Shield coinsurance steadily rising...

...Inadequate day care facilities and underfinanced public schools deprive children in female-headed families, who are overwhelmingly below the poverty line, of decent chances for a good education and productive lives...

...More women are working because a single paycheck no longer finances a minimal middleclass package of consumer goods and services...

...Consider, courtesy of the Wall Street Journal and the New Republic, two exemplary cases...

...As a result of devoting a large proportion of our national resources to the elderly, says Longman, we are cheating the young...

...States and cities are, if anything, in poorer shape...

...It is a rare family that possesses space for parents or a burning desire for their company...

...Medicaid ministers to a shrinking percentage of poor children...

...Zuckerman is a real estate developer and owner of the ? tlantic and U. S. News and World Report...

...American productivity growth may spurt...

...Longman frets at the sight of multimillionaires collecting Social Security and Medicare...

...Our seeming inability to finance our exiguous social benefits is a mystery readily solved...

...Longman, like a good Chicago economist, analyzes birth rates as parental tradeoffs between children and other consumer goods...

...When will the International Monetary Fund dispatch one of its rescue missions to Washington...

...Mortimer Zuckerman has paid no taxes since 1980...

...The two men, their few peers and smaller operators took entirely legal advantage of tax laws that withhold from ordinary paychecks but allow the Forbes 400 to escape nearly scot free...

...Simon is a virtuoso of the leveraged buyout game...

...Just wait...

...No sensible society should spend so much to extend the painful, debilitating, undignified last months of the old, and so little on low-income infants, growing children and their mothers...

...In a high employment economy, older workers will be in demand...

...But emotions that have eluded economists are at work, too...