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MEET DAVID C. JOHN:
For Our Grandchildren's James Hamilton recently chatted with the Heritage Foundation's David John, one of the nation's leading authorities on the budgetary aspects of Social Security's impending crisis and a leading expert on attempts by other countries to address their own Social Security crises.
David C. John serves as the Heritage Foundation's lead analyst on issues relating to relating to pensions, financial institutions, asset building, and Social Security reform. In 2001, he testified before the President's Commission to Strengthen Social Security, providing analysis of how personal retirement accounts could be structured and regulated. John also testified before the House Budget Committee's Task Force on Social Security, explaining what the costs of transitioning to a system of Social Security personal retirement accounts might be as compared to the cost of running the current program. He has been published and quoted extensively in many major publications, including the Wall Street Journal, Financial Times, Washington Post, New York Times, Chicago Tribune, Los Angeles Times, Philadelphia Inquirer, Washington Times, Forbes, Business Week, and USA Today.
Interview
Hamilton: We hear all the time about the coming Social Security crisis. Can you put the crisis in financial terms everyone will understand?
David C. John: Social Security has promised more to future retirees than it can afford to pay. In just 10 years, it will start to pay out more every year in benefits than it receives in taxes. That gap will start relatively small by government standards. It will be just a few billion dollars a year, but will grow to over $100 billion a year (or about $400 per person) after five years. It will grow to $200 billion a year ($800 per person) after about 10 years, and $300 billion a year within 15 years. Until 2041, this extra money will go to repay the Social Security trust fund.
Hamilton: That really DOES sound like a crisis. Where will this money come from?
David C. John: It will have to come from us. There are two choices. One is that government programs ranging from defense, to education, to environmental programs, to highway construction will have to be cut. The alternative is that in addition to the payroll taxes and income taxes that we currently pay, we will have to pay additional taxes each year so that Social Security can pay all of the benefits that it has promised. Neither choice is very good, and the option of tax increases will be affected by the fact that health care programs will be running even bigger annual deficits at the same time that Social Security is running deficits.
Hamilton: So existing programs like Head Start, Meals on Wheels, and student loans could be affected?
David C. John: Absolutely. The odds are that if there is no permanent fix of Social Security, Congress will try to both raise taxes by a certain amount and to cut spending programs. In the case of spending cuts, popular programs will compete against each other for scarcer and scarcer funds. As those Social Security deficits grow, more and more important programs will be cut.
Hamilton: Where does that leave us? Is there a solution out there that a majority in Congress could support?
David C. John: Not so far. While there are a number of serious legislators in both parties who recognize the need to act quickly to fix Social Security, most legislators are just looking the other way. A serious effort to fix Social Security would focus benefits on those who most need it, while establishing a personal savings element to Social Security.
Hamilton: When you're not crunching numbers or spending time on the road, what do you do to unwind?
David C. John: Read and spend time with my family.
For a complete list of David C. John's papers, click here.
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