August 1, 1998

The Time is Right to Save for our Future

By: AFF Editors

If you think back to your college days, you probably remember your professors’ warning to keep up with the syllabus or face the final exam unprepared. If you are anything like myself, however, you probably ignored that suggestion more than once–it was too difficult to worry about an exam that was still weeks away. Low and behold, the exam would come. You would cram, do all right on the test, but wish you would have done more work when the going was easy. And you would swear to keep up in the future.

Relatively speaking, the going is easy at the moment. America’s economic picture is rosy. As we quickly learned upon departing the hallowed halls of academia, it is one thing to cram for a college exam, quite another to risk our future financial security. Today’s thriving economy offers young American workers an opportunity to prepare for the inevitable problems looming on the horizon. Most experts agree: the economy will take a downward turn, Social Security (as we know it) will vanish, and health care costs will continue to skyrocket while insurance companies shoulder less of the tab and Medicare collapses. The time for change and preparation is now.

It is tough to look ahead and imagine doom and gloom when things are going so well. It is even more difficult to call for change when we have been so fortunate. Sure, there has been a recession or two and a couple of sizable crashes on Wall Street, but, for the most part, our lives have been marked by one of the strongest economies in America’s history.

The past six years or so, largely because of the policies enacted during Ronald Reagan’s presidency, have been more fruitful than ever. Each of the leading indicators of economic growth speak to a booming economy. Since 1990 the Dow Jones Industrial Average, the leading indicator of stock market strength, has more than tripled–opening the decade at 2,700 and now hovering around 9,000. The unemployment rate, which shot to nearly 8% in 1992, is now resting around 4.5%. America’s less fortunate have done better in the past six years as well: welfare rolls around the country are reaching levels unseen since the mid-1970s. And of particular interest to “Gen X,” the booming economy has made finding a job as a new college graduate a relatively easy process–in fact, starting salaries for new grads are inching towards $40,000 in many major cities.

An additional sign of the economic good-times is Congress’s relatively successful effort at putting the government’s fiscal house back in order. Six years ago, at the height of imbalance, the federal deficit totaled $290 billion. At the close of Fiscal Year 1997 that figure had been chiseled down to $22 billion. Last month, the Congressional Budget Office (CBO) estimated the federal government would finish Fiscal Year 1998 with a $63 billion surplus. Even more astonishing, CBO now estimates that the aggregate surplus over the next five years will grow from $225 billion to $520 billion.

Ironically, the astonishing enormity of this figure is also the first sign of danger. Politicians on both sides of the aisle will tell you they are to be credited for today’s surplus. In actuality, the federal government is simply taking too much of our money. A $63 billion surplus means Uncle Sam took $63 billion in taxes he did not need–and that comes on top of spending a good part of the $1.7 trillion budget on bike paths, corporate welfare, 165 unsuccessful job training programs, agricultural-based industrial lubricants in Iowa, and any number of other wasteful and unnecessary expenditures.

At the same time the federal government is wasting money, little or nothing has been done to help prepare the Social Security system for its impending downfall–leading many Americans to inquire, “What’s more important: the $10 million bike path from Union Station in Washington, DC to Silver Spring, Maryland or the future of Social Security?” The federal government, led by Republican Bud Shuster in this instance, has chosen the bike path. These types of wasteful and self-motivated decisions will inevitably leave our generation cramming to make repairs to Social Security days before the program collapses–in a time when the country’s economic picture may well be far less rosy.

Rather than peddling our money and futures away, Congress should use today’s fat economy to transition to private savings programs where Americans can take control of their own money and futures. Private retirement accounts encourage personal responsibility, have been shown to provide a higher rate of return, and all but guarantee a brighter future than the one which Congress appears content to leave us with. Similarly, private medical savings accounts bring a market approach to health care, put the individual (rather than the employer) in control of their personal well being, offer maximum flexibility in choice of providers, and will grow enormously during our years of relatively minimal medical need.

Despite these obvious benefits, the federal government appears to be in no hurry to worry about our futures. Mindful of the inevitable problems, and having become well aware of the dangers of cramming, we must demand changes today. Moreover, it would behoove us to set an example for policy makers by beginning to build our own savings accounts and laying the foundation for a more secure tomorrow. The time is ripe for change, the policies are sensible, our personal and financial security is at stake. What are we waiting for?