This is not a matter of choice or philosophy. It is an implacable force of nature. It is something far beyond pride or vanity. It is the way things are.
This is not to say that every parent's extra mile is the same. For some it is expensive schools from age 4 onward. It can also be orthodontics, summer camp, or gifts of cars most parents can't afford.
For some parents nurture doesn't end with college. It continues through graduate school, law school, business school, or medical school. It can go well beyond the ordinary extra mile.
Is any of it excessive?
Not a chance. Indeed, none of those extra miles will be enough.
While today's parents are giving with one hand, a larger but less visible hand is preparing to take far more from today's children in the future.
That less visible hand is our government. Everything that we do today will put much higher taxes on our children in the future.
This is not a plutocratic Republican plot. Nor is it a scheme of whining Democrats. Both parties are equally ignorant and equally culpable. Until recently we could truly say that they should be forgiven because they literally didn't know what they were doing.
But that can't be said anymore.
More than a decade ago a new way to examine government activities was created. It's called Generational Accounting. It allows economists and legislators to examine the true costs of governmental promises that span generations instead of years. It ends any excuse for shortsightedness. Sadly, it also tells us that the future our children and grandchildren face can be described in a single word.
In "Is War Between Generations Inevitable?"researchers Jagadeesh Gokhale and Laurence J. Kotlikoff spell it out. Mr. Gokhale is a Senior Economic Advisor to the Federal Reserve Bank of Cleveland. Professor Kotlikoff teaches economics at Boston University. Both are prime movers in the new discipline of generational accounting. (The paper is available on the National Center for Policy Analysis website: www.ncpa.org. publication number 246)
The two researchers examined the imbalance between tax collections and future promises of support for Social Security retirement benefits and Medicare benefits. They found that taxpayers not yet born face tax rates at least twice as high as current taxpayers. To arrive at their figures they calculate the total of all expected taxes (labor income, capital income, payroll taxes, and excise taxes). Then they net the total tax burden against all expected benefits (Social Security, Medicare, Medicaid, and Welfare) to find the net lifetime tax rate. Here are some of their findings:
• A newborn child, today, can expect to pay 17.7 percent of lifetime income in taxes. But tomorrows' children can expect to pay at an average rate of 35.8 percent. That's twice as much.
• Remember the Bush tax cuts? They made the problem worse, cutting lifetime taxes for older people but raising them for new taxpayers. The Bush tax cuts mean that newborn taxpayers will pay a lifetime rate of 18.65 percent (up from 17.7). Today, there is talk of further tax cuts. If taxes are cut we will, once again, be cutting the taxes on current taxpayers without a commensurate reduction in future benefits. The consequence is higher taxes on those unborn and unable to vote.
• If Social Security, Medicare, Medicaid, and Welfare entitlements are not changed within 5, 10, or 20 years, future children can expect to pay lifetime tax rates of 40 percent, 46 percent, or 63 percent, respectively. The increase from 35.8 percent to as much as 63 percent gives you an idea of the cost of delay.
Yes, you read that last figure right. Unborn taxpayers could face a lifetime tax rate of 63 percent. If our elected officials continue to think in 2 and 4-year election cycles instead of measuring multi-generational political promises, our children and grandchildren will come of age in an economic disaster.
Can we do anything for our children and grandchildren that would offset having to pay more than twice as much of their income in lifetime taxes?
Tell me if you can think of anything. I've drawn a blank.
Earlier columns on generational accounting:
April 19, 1998: Politics, Footnotes, and Your Children
October 22, 2000: Truth, the Third Rail of American Politics
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