This blog is intended to go along with Population: An Introduction to Concepts and Issues, by John R. Weeks, published by Cengage Learning. The latest edition is the 12th (it came out in 2015), but this blog is meant to complement any edition of the book by showing the way in which demographic issues are regularly in the news.

If you are a user of my textbook and would like to suggest a blog post idea, please email me at: john.weeks@sdsu.edu

Tuesday, December 6, 2011

The Demographics of Cutting (or Not) the Payroll Tax

Congress is currently debating an extension of a payroll tax "holiday" which, during the past year, had lowered the contributions that US workers have paid into Social Security. This was an idea put forward by President Obama's Deficit Reduction Commission, which issued its report a year ago. It was, unfortunately, one of the few items from that report that the Obama administration embraced. I'm in favor of lower taxes on me, but, as the Deficit Reduction Commission noted, we are in troubled times:

Over the long run, as the baby boomers retire and health care costs continue to grow, the situation will become far worse. By 2025 revenue will be able to finance only interest payments, Medicare, Medicaid, and Social Security. Every other federal government activity – from national defense and homeland security to transportation and energy – will have to be paid for with borrowed money. Debt held by the public will outstrip the entire American economy, growing to as much as 185 percent of GDP by 2035. Interest on the debt could rise to nearly $1 trillion by 2020. These mandatory payments – which buy absolutely no goods or services – will squeeze out funding for all other priorities.
The Census Bureau emphasized the demographics of this problem a few days ago, as they reported on the latest news about aging in America--as I discussed here. So, the truth is that we are less in need of a "holiday" than we are in need of a dose of reality. For the next decade or so, we are all going to have to bail ourselves out with more tax revenue at the same time that we figure out ways to save money. We have to do both. The Deficit Reduction Commission actually came up with a whole program of good, but painful ideas. Since we cannot roll back the demographics--and keep in mind that the US demographics are not as bad as in Europe and East Asia--we need to come to grips with reality and feel each other's pain.

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