(AP Photo/Pablo Martinez Monsivais)
Next month, Britain will hold Parliamentary elections to vote on a government for the next five years.
Fortunately, the ruling Conservative Party looks likely to win. I say “fortunately” because the Labour Party – the other party that has a chance of winning – is led by an anti-American socialist.
But I also support the Conservatives for another reason.
They are offering three reforms to cap wealth transfers from young to old.
First, the Conservatives plan to reform Britain’s social care system. Going forward, Britons will have to pay for social care up until their last $130,000. At that point, the government will pay. It’s a bold but necessary reform in an era of aging populations. Individuals need to save more for their own retirements. They cannot expect the government to pay for everything. Absent this change, Britain will go bankrupt as millions of elderly citizens are left unable to support themselves. Private insurance markets will be crucial going forwards.
Second, changes to the social security formula. At present, British social security payments rise each year depending on whichever is highest between inflation, average earning rises, and 2.5 percent. But according to government statistics, with inflation of around 15 percent over the past six years, and earnings increases of 14 percent, the 2.5 percent ratio has meant social security payment increases of around 25 percent. This is unfair on taxpayers below social security age. If they win, the Conservatives will tag pensions to the higher of either inflation or earnings, but not 2.5 percent guaranteed. This will offer a fairer deal for younger Britons lacking such security.
Third, cutting so-called “winter fuel payments” for wealthier seniors. At present, all seniors – with few exceptions – receive a payment in December of between $130 and $390. This is additional to social security payments. It might seem like a small amount, but when applied across the senior population, it represents over $2.5 billion. The Conservatives want to save these payments for poor seniors.
Of course, some say that these changes are unfair. Immoral even. But they neglect a simple truth. The government must balance wants and needs. And in 2017, millennials are currently getting a raw deal. The deficit is already significant. But each additional dollar of new deficit spending – or in the case of the UK, each additional pound – is another that younger Britons must pay off. This deficit feeds a debt that drowns out future opportunities. And it applies equally to America. Take our growing debt-interest burden. As I noted last year, “the CBO believes that net interest payments on the debt will rise from 1.4 percent of GDP today to 5.8 percent of GDP in 2046. To put that in perspective, had the U.S. spent an extra 4.4 percent GDP on debt service in 2015, it would have added $790 billion to the federal budget deficit.”
Think about that. Driven by unreformed entitlements, millennials are heading for a future where around $790 billion a year will have to be found. Not for new programs or existing programs. Not even for paying off the debt. Just to pay the interest on that debt! This is a crisis. Unfortunately, unlike British Conservatives, Washington has shown little interest in entitlement reform.
On this issue, conservatives must learn lessons from across the ocean. But with our national debt projected to skyrocket in the years ahead, we better learn fast.