Let me give you some facts. The share of fiscal spending going to seniors has been growing dramatically since the 1960’s when Medicaid and Medicare joined social security as federal entitlements. Today we spend 6x more per senior than per child in the US. Think social security vs education. Almost 40% of all our taxes are spent on seniors, and this trend is only starting. As the chart shows {Slide #2 below}, we are just getting under way in terms of the fiscal consequences of the grey boom. In 25 years, spending on seniors will grow to take 70% of all taxes. Effectively, with entitlements compounding away, everything else gets squeezed.
In this context, the fiscal recklessness of the last decade has been like watching a horror movie unfold. Look at this chart {Slide #3 below}. During the last decade, our debt grew from $15T to $31T today… a level of indebtment only comparable to that after WWII. But what is worse is that this debt does not account for what the government has promised it will pay you in terms of social security and Medicare. It actually assumes these payments will be ZERO. In the 1950s this “off‐the‐book” debt was small as baby boomers were just being born so actual debt was a reasonable measure of the country’s indebtedness. Not anymore. There are credible estimates that if you assume the government will pay the same to seniors in the future as it is paying today, the present value of that debt approaches $200T. That’s trillion with a “T”.
What makes the last 10 years particularly horrific is that we had some golden opportunities to reduce the fiscal gap ahead of the demographic storm that is under way. After WWI and II, the US quickly repaid its debt by raising taxes and restricting spending. Contrast that with today. After the GFC but pre covid {Slide #4 below}, when the economy boomed in 2018 and the unemployment rate hit a 50‐year low, and even under a Republican administration, the deficit could not go lower than 5% of GDP! And then post covid, we had a booming economy where tax revenues were augmented by high inflation, nominal growth of