Americans suffer from retirement angst now more than ever.
A public opinion poll released earlier this week by the National Institute on Retirement Security reveals that eight out of 10 Americans believe their Washington leaders don't understand how difficult retirement preparation is in this economy. And 80 percent say leaders should place retirement security for Americans higher on the list of national priorities. Strengthening Social Security is the most important action our leaders can take, say 47 percent of Americans in that survey.
Yet -- finally -- momentum is building in Washington D.C., to address the long-term budget deficit problem, with a small but growing bipartisan group of politicians willing to step up to the difficult task of cutting entitlement spending. The proposals introduced last December by Democrat Erskine Bowles and Republican Alan Simpson, chairmen of the deficit-reduction commission, are back in the limelight. Their solutions are thoughtful and intelligent, but do involve sacrifice, mostly from wealthier Americans.
Inaction not an option
We can't just ignore the problem because it won't go away. It will feed on itself and collapse under its own weight. The interest payments on our debt this year alone amount to more than $200 billion, about the same amount that will be spent this year on health care for the poor through Medicaid, says Gerald Seib in a recent column in the Wall Street Journal.
These interest payments don't circulate in the U.S. economy, he points out. They go mostly to foreign investors. "Big deficits require taking on more debt, which in turn adds to the interest payments required to service that debt. In short, it's a Ponzi scheme," he writes, advocating for reining in entitlement spending sooner rather than later.
Medicare, Medicaid and Social Security together will constitute about 42 percent of projected federal spending this year, and 6 percent will go to service the debt. In 10 years, the interest bill will rise to $928 billion per year, according to the Wall Street Journal. The situation is simply unsustainable.
Focus on the future
But Americans are looking to lawmakers for solutions to strengthen Social Security, not pare it back. Nearly seven out of 10 say they are opposed to cutting benefits for current retirees, and nearly six out of 10 say they are against cutting benefits for future retirees, according to that NIRS poll.
In this week's cover story in Time magazine on the decline of America, author Fareed Zakaria says that our political system is too focused on preserving the past. "There are no special-interest groups for our children's economic well-being, only for people who get government benefits right now," he writes. "The whole system is geared to preserve current subsidies, tax breaks and loopholes."
He's right. Our country has been on a wild spending spree. That short-sighted "spend-today, worry-about-the-debt-tomorrow" mentality is how we got to the edge of the precipice. The rating agency Moody's, on more than one occasion, threatened to review our triple-A rating for a possible downgrade. That would be disastrous. It's about time lawmakers take a cold, hard look at the national debt and tackle it.
I cherish our social programs, and I'm hoping our Washington leaders act soon to make sure they'll be around for future generations. What about you?
Check out Bankrate's Retirement Realities series. We'll be adding stories to it throughout the year.
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