by Witherspoon Issues Analyst Gene TeSelle
[10-6-07]

TeSelle says he recognizes the complexity of this issue, and will welcome comments and corrections. So please send a note with your own thoughts, links to other helpful discussions, or any other contribution!

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On August 25, 2007, the Presbytery of New Covenant (southeastern Texas, centered on Houston) approved an overture that had been sought by the session of the First Presbyterian Church of Pearland, TX. The pastor of the congregation is the Rev. Casey Jones, a frequent critic of Stated Clerk Clifton Kirkpatrick and a candidate for his office in 2000.

Raising the theme of "intergenerational injustice," it urges the 218^th General Assembly to declare the federal government's unfunded or underfunded mandates — specifically Social Security and Medicare — "a grave moral concern" as well as "a clear danger to the republic." In strong language it calls on the church and the nation to "repent of the sins of greed and of stealing from future generations who cannot defend themselves."

This overture could help start a Presbyterian dialogue on the often-mentioned issue of justice toward future generations — and specifically the federal budget. First let's look at the problem.

There has been much discussion in recent years about the future obligations of Social Security and Medicare, especially when increasing "age cohorts" of Baby Boomers begin collecting benefits. (They're just starting to reach the age of 62, when they can opt to receive Social Security payments.) Number-crunchers, of course, know how to look at population figures and calculate the pace at which these obligations might come due. Many conservatives predict a major fiscal crisis; other analysts argue that any crisis can be avoided by making relatively small adjustments in retirement age and government income, or by restructuring government's relation to health care, not only for seniors but for all.

Social Security and Medicare are not the only area of the federal budget identified as imposing a burden on future generations. Another is the Iraq War, whose costs currently total around $450 billion, spent without any corresponding increase in tax revenues.

And since 2001 there have also been warnings about the steady increase in the national debt, which was wiped out during the Clinton administration because of the furor raised by the Concord Coalition and other "deficit hawks" but began rising again with Bush-era cuts in income and inheritance taxes. Currently the debt is nearing $9 trillion.

Concerns are also raised about who owns Treasury bonds. They are held not only by private individuals and large banks and investment funds but by other governments or their "central banks," since there is a worldwide money market in which currencies are traded. Japan holds the most, followed by China, the United Kingdom, and the OPEC countries. Over $5 trillion of the debt is held by these private and governmental investors. The rest, nearly $4 trillion, is held by U.S. government entities, especially the Social Security and Medicare trust funds. (See www.treasurydirect.gov/NP/BPDLogin?application=np.) Critics say that this hides nearly half of the debt in "soft" obligations of the federal government.

We are often warned that the official figure for the national debt is misleadingly low. The government uses "cash" rather than "accrual" accounting methods. When the future obligations of the government are counted, they total approximately $50 trillion. Of course these obligations will come due over a period of decades, and thus the figure may not be as daunting as it first appears.

Discussion of these obligations cannot help being saturated in politics. The figures quoted in the New Covenant overture come from David M. Walker, Comptroller of the United States, and they conclude with an exhortation to rethink, and doubtless reduce, government programs (see www.gao.gov/cghome). Democrats like Congressman Jim Cooper (TN-5) accuse the President of painting too rosy a picture when he talks about national debt, and they emphasize that the growth in debt and obligations occurred during his watch (www.cooper.house.gov). Cooper, along with other conservative Democrats and several Republicans, has introduced the Securing America's Future Economy Commission (SAFE) Act, which would establish a sixteen-member bipartisan commission to propose legislation that could only be voted up or down (a tactic used to deal with controversial issues like the closing of military bases).

Much of the increase in future obligations is the result of the prescription drug benefits voted by Congress at the instigation of Senator Bill Frist. The plan is widely criticized as a giveaway to the pharmaceutical companies, because it accepts their prices and prohibits any negotiation over prices, even though the Veterans Administration has bargained this way for years.

At the same time there has been decreasing growth in government revenues because of the massive cuts in both income and inheritance taxes during the Bush administration. The argument has been that these would free more money for private investment. And that has certainly happened. The result is a dramatic redistribution of income and wealth in the U.S., giving rise to inequalities that have not been seen since the Gilded Age of the late nineteenth century.

The New Covenant overture quotes several passages from the Bible: "The good leave an inheritance to their children's children" (Prov. 13:22). "But if any provide not for his own, and specially for those of his own house, he hath denied the faith and is worse than an infidel" (1 Tim. 5:8 KJV). Special emphasis is placed on the Jubilee Year, which "was instituted so that even a profligate and irresponsible generation in the life of a family could not permanently endanger the inheritance of its heirs by selling off the family wealth forever."

While the purpose of the Jubilee Year was to restore the family heritage, the emphasis of the New Covenant overture is upon the irresponsibility of getting into debt in the first place. The overture does not say how the current inequalities are to be relieved over the next fifty years.

In the light of passages like these, what are we to do about our intergenerational responsibilities?

One approach (and this seems to be implied by the overture) would be to revise downward the financial commitments that have been made.

The other is to stand by the commitment and begin making financial provisions adequate to those needs.

We usually urge people to keep their promises and fulfill their commitments. To make a promise without the intention to keep it is regarded as a sign of carelessness at best, and cynicism at worst. Jesus' parables note that someone building a tower will first count the cost to see whether the project can be completed (Lk. 14:28-30), and that a king before going to war will ask whether his forces are strong enough (Lk. 14:31-33). Discipleship, he goes on, involves a similar counting of the cost. The opening of the passage indicates what can be involved: alienation from family members, even loss of life (Lk. 14:26-27).

The Bible does not represent all promises as worthy; Jephtha's vow (Jud. 11:29-40) was especially unreflective, made without considering the consequences. The current Iraq war is often considered to be a commitment of this sort. At the same time, even those who now call it a mistake (including most of the Democratic presidential candidates) feel that we must work through the problems that we have created.

While we usually praise foresight and promise-keeping, there are many who feel that the commitments made in federal legislation to future generations are not their commitments; indeed, they may be opposed to those commitments for a variety of ideological or pragmatic reasons.

While we may debate the merits of any policy decision, there is an issue of civic responsibility. It is often said that society at large and public life in particular depend upon trust and trustworthiness. This is a responsibility borne by all of us but especially by all those who, having sought public office, were elected to it and swore to administer the laws faithfully.

During the Reagan administration a number of tax cuts were made, and David Stockman revealed some years later that it was done quite consciously with the purpose of putting the federal budget under pressure so that expenditures, including entitlements, would have to be decreased. There are no similar reports of conscious calculation of this sort in the Bush administration, but the administration has declared its commitment to privatizing many of the functions of government and decreasing the federal role in pensions and health care.

It is not that our society is lacking in the resources needed to carry out these commitments. The economy is generally said to be doing well, and there are some people who have a lot of available money, as manifested in ways ranging from the escalating size and luxury of first, second, or third homes to the growth of private investment funds with billions of dollars, enabling them to purchase huge corporations, restructure them, and put them back on the market with new stock offerings.

This brings us back to the theme with which we began — Social Security and Medicare, and retirement more generally, for it is not only these government programs that are in trouble. Corporations, too, are complaining about the rising costs of their commitments to retired employees. Retirees are living longer than expected because of improved health care in the U.S. At the same time the costs of that health care are increasing, now approaching 15 percent of the gross national product.

The rising costs of health insurance for these retirees makes it difficult for U.S. corporations to compete with corporations in other countries where health care costs are covered by governments. This is one of the strongest arguments, of course, for a national health care plan that covers all persons. It would be most efficient if it were a "single-payer" plan administered by a government agency. At a minimum, tax revenues would make up for the gaps in social insurance or in privately purchased coverage.

Corporations also complain about the cost of paying pensions to retirees who live longer than they expected decades ago. Often they are able to evade this responsibility. At times they persuade unions to accept decreased benefits while bargaining over contracts. At times bankruptcy proceedings lead to a diminution of benefits, and several airlines have recently accomplished this. At times it happens through corporate mergers or acquisitions, or when a private equity fund buys a corporation with the purpose of restructuring all its obligations and making it more profitable to potential investors.

Cuts in health care and pension payments for retired employees could have been prevented if corporations had dedicated enough of their assets to retirement funds of this sort. One suggestion has been that every corporation be required to invest a stated percentage of its stock each year in a varied and secure pension fund to ensure long-range viability. In discussions of this sort, TIAA-CREF, started ninety years ago for academics, is held up as a model.

During September of 2007 the United Auto Workers struck General Motors, concerned about pensions, medical expenses, and job security. The debate gave the public an education about at least one way of dealing with retirement obligations: the VEBA, or Voluntary Employees Beneficiary Association Plan, and General Motors agreed to put about $35 billion in cash and securities into a VEBA managed by the UAW, in return for which it would be freed of any other obligations to current or retired workers. This may not be the best approach, since it was worked out when GM was under pressure from stock analysts, investors, and foreign competitors, and the UAW was threatened with higher co-payments and unpredictable job losses. The UAW has the responsibility of investing the funds and getting the income needed to fulfill the obligations. But at least we are getting serious public discussion of the issues.

Tully Memorial Presbyterian Church

Sharon Hill, PA