Baby boomers luck out in deficit-cutting plans
Senior couple sitting at a laptop
TEXT OF INTERVIEW
Jeremy Hobson: So everyone's trying to balance the budget. We got the plan last week from the President's deficit commission. Yesterday, there was another plan. And there will probably be even more proposals in the coming weeks.
But our Economics Correspondent Chris Farrell has found a disturbing trend in these deficit cutting plans. And he joins us now. Good morning.
Chris Farrell: Good morning, Jeremy.
HOBSON: So what's the similarity between these plans?
FARRELL: Well an under appreciated aspect of these plans is that they give baby boomers -- the generation that has created the fiscal mess -- basically a pass on fixing the problem.
HOBSON: They're getting off the hook. What do you mean, what are the examples of this?
FARRELL: It's really noticeable in the Bowles-Simpson plan. They say we're going to boost the retirement age for Social Security to age 69 by 2075. The boomers are going to be dead by then! So you're going to gradually hike the federal gas tax by 15 percent, all right? Starting in 2013. Aging boomers? They're not going to be driving much when they're old. And oh yeah -- with tax reform, you eliminate the child tax credit? Well guess what -- hopefully -- the kids are out of the house. So if you just go through all these things, it's not going to affect the boomers that much.
HOBSON: So why are they designing the plans this way?
FARRELL: The main reason is, going on, you want to protect aging boomers because they've lived under one set of rules. For example, mortgage tax deduction. Well, a lot of boomers went out there and bought a house with a mortgage tax deduction. You take it away, that seems unfair. But the thing is, the more that you protect the boomers, the more you pass the costs on to future generations. And that doesn't seem fair to me.
HOBSON: And of course the boomers are the ones who vote. Do you think they will end up paying a price at any point in the end here?
FARRELL: Yes, I do, and for two reasons. One, there's going to be a lot of negotiation, and in that negotiation, boomers are going to end up paying a bigger price. But here's the real thing, Jeremy: if you look at the long-term budget deficit, the fundamental issue is the rising cost of Medicare. That's the real problem. And in the end, that's where a lot of the changes are going to be. And boomers, they're starting to file for Medicare.
HOBSON: Marketplace economics correspondent Chris Farrell, thanks so much.
FARRELL: Thanks a lot.