In only seven years, all of America will look exactly like Florida does today, at least on the age spectrum.
Today, 13% of the U.S. population is over 65 years old; in Florida, the number is 18%. Come 2020, fully 18% of the nation will join that cohort.
That single fact may explain why last year’s election was the first in what may be a decades-long series of referendums on what’s more important—growing the pie or slicing the pie. It’s clear that the American public wants most of the benefits of a huge welfare state and simply doesn’t want to pay for it. Unfortunately, that’s not an option.
In early January, 77% of working Americans saw their taxes go up in one form or another, according to various estimates. These tax hikes are barely expected to put a dent in the federal deficit, but they should put a drag on GDP growth in the first half.
If you believe the Grecian formula developed by the party animals at the International Monetary Fund, the fun is just about to begin for all Americans. The IMF contends that all it will take to render this nation solvent is a 35% increase in each worker’s taxes and a 35% reduction in everyone’s social insurance benefits.
Affluent Americans are the first to feel the pinch, but not the last. After the recent tax hikes, it is projected that 0.7% of the population will pay 40% of federal income taxes. Pity the Morgan Stanley bankers, who, when faced with higher taxes, get IOUs in lieu of cash bonuses.
It’s only a matter of time before most middle-class Americans get whacked with their own IOUs from their government. Ordinary Americans contribute far less in federal taxes than their European counterparts, and advocates of a European-style welfare state at outfits like The New York Times are urging a rash of new taxes, like a national sales tax, a carbon tax and a possible fat tax, for the middle class, as well as a financial transaction tax and a wealth tax for the rich. Eventually, they will want to tax the taxes.
Americans aren’t stupid. They don’t want to become France and they don’t want to become Hong Kong either.
The expand-the-pie vision articulated by conservatives resonated with the public in the 1980s and 1990s when a rising tide really did lift many boats. Between 2001 and 2012, the message fell flat, when wages as a percentage of GDP fell from 59% to 54%.
Over the next five years, the economy is likely to improve, so the focus on sharing the pie may recede. But come 2020, the argument is likely to return—louder than ever.
Evan Simonoff, Editor-in-Chief
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