October 25, 2013

M.D. Harmon: Government steals from the young to give to the elderly

Some are calling this ‘generational theft.’

The interesting thing about the truth is that hard facts don’t bend to political spin.

For example, even though President Obama said that raising the debt ceiling doesn’t raise the debt, on the day last week that he signed a bill to raise the limit, the national debt grew by $328 billion, topping $17 trillion for the first time ever.

The facts about federal red ink are also spinning around college campuses, thanks to a 60-year-old billionaire who thinks that income redistribution from the young to the old has gotten entirely out of hand.

Stanley Druckenmiller, a 1975 Bowdoin College graduate who retired recently from Duquesne Capital in Pittsburgh, is rated by Forbes as the world’s 503rd richest person, with a net worth of $2.8 billion.

He co-authored a column in The Wall Street Journal on Valentine’s Day that many in his age group likely didn’t think of as a love letter.

Along with Geoffrey Canada (Bowdoin ’74), an urban educator in Harlem, and the Hoover Institution’s Kevin Warsh, a former Federal Reserve governor, Druckenmiller wrote that “generational theft” is poised to do irreversible fiscal harm and must be halted.

The three authors, a Republican, a Democrat and an independent, said that “we recognize several hard truths: Government spending levels are unsustainable. Higher taxes, however advisable or not, fail to come close to solving the problem. Discretionary spending must be reduced but without harming the safety net for our most vulnerable, or sacrificing future growth (e.g., research and education). Defense and homeland security spending should not be immune to reductions. Most consequentially, the growth in spending on entitlement programs – Social Security, Medicaid and Medicare – must be curbed.”

Hard truths, indeed. But, the authors add, “These truths are not born of some zeal for austerity or unkindness, but of arithmetic. The growing debt burden threatens to crush the next generation of Americans.”

So Druckenmiller and Canada took their argument directly to the next generation, starting at their alma mater. On May 7, they spoke at Bowdoin to make the case that, among other things, the nation’s biggest wealth-transfer programs take hundreds of billions from the less affluent young and give it to the relatively more affluent elderly.

They called that “stealing opportunity from America’s young.”

And they said it’s vital to adopt measures, such as means-testing benefits and raising eligibility ages, to start to rein in the programs’ unfunded obligations, which by various measures run from $40 trillion to $90 trillion – or more.

Without reform, they said, the next generation of Americans will face a future with far fewer opportunities for prosperity and growth than their parents enjoyed.

And on Oct. 21, the WSJ carried a follow-up interview with Druckenmiller in which he said, “I have been shocked at the reception. I had planned to only visit Bowdoin.” But, the paper noted, “He has since been invited to multiple campuses, and even the kids at Stanford and Berkeley have welcomed his theme of generation theft.”

“The biggest question I got,” Druckenmiller said, “was, ‘How do we start a movement?’ And my answer was, ‘I’m a 60-year-old washed-up money manager. I don’t know how to start a movement. That’s your job.’ ... But the enthusiasm – they get it.”

He added, “I’d say (the students are) a combination of appalled and motivated.”

Indeed, any young people contemplating what percentage of their incomes goes to support others with equal or higher standards of living might well be appalled – and certainly should be motivated.

(Note, too, that the Affordable Care Act’s demographic push requires millions of the healthy young to sign up for insurance coverage they are unlikely to need now to pay for the benefits of older, sicker people.)

(Continued on page 2)

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