Commentary: Who Should Bear the Burden of Fixing Social Security and Medicare?

Social security will only be able to pay full benefits through 2037and the unfunded liabilities of social security and Medicare are reported to be $106 trillion.

For a nation with $13 trillion in debt, that’s a lot of money to pay back 7.65 percent at a time, the amount workers must pay in FICA taxes. Faced with unsustainable deficits, our elected officials can reduce the promised benefits of the baby boomers, the demographic largely responsible for excessive spending, or it can tax Generation X in the prime of their income producing years.

The system is broken and somebody has to fix it.


The baby boom generation spent three decades voting for small government and personal responsibility; some say Congress should give it to them.

It’s been noted, however, that 51 percent of Americans over the age of 55 had less than $50,000 saved for retirement in 2007 before the recession even hit- the days of telling welfare queens to take lemons and make lemonade are long gone. Moreover, Ronald Reagan raised taxes more than he cut them, increasing the FICA tax during his administration from 6.65 percent to 7.51 percent and raising the ceiling by more than 61 percent.

In other words, a 65 year old retiree who entered the workforce at the age of 18 paid lower FICA taxes for forty percent of his/her working years than is currently being assessed.

Having said that, how does the government renege on promises many workers have planned to receive? Congress would never short-change such an organized voting bloc, which leaves the next best option.

"Generation X will ultimately be asked to subsidize benefits that they themselves will never receive." -Scarborough Capital Management, Inc, Ivory Johnson, CFP, ChFC

Generation X is the gross sum of double standards, lodged somewhere between blameworthy and expendable.

It seems that the MTV audience is now the adult of the economy, growing up to face unsustainable government debts, slow economic growth and the burden of raising their own children at the same time. Nevertheless, raising the FICA taxes by 1 percent would eliminate the social security deficit, as would increasing the full retirement age to 70, the equivalent of a 19 percent cut in benefits. Entitlement spending is 40 percent of the federal budget; nibbling around the edge of civil discourse is no longer an option.

The debate about class struggle is getting old, but so is the largest demographic in the country. Somebody will have to support those who spent the last 30 years in control of an economy entrusted to them by their depression era parents, one that boasted a balanced budget and an aversion to immediate gratification.

Generation X will ultimately be asked to subsidize benefits that they themselves will never receive. Of course, we may see a resurgence of personal responsibility and disdain for government spending once the unwitting advocates of fiscal responsibility understand the implications, but that’s a most unlikely outcome.

We know it’ll be a good fight, let’s see if it’s a fair one.

Ivory Johnson is the director of financial planning at Scarborough Capital Management, Inc. He is a Certified Financial Planner, a Chartered Financial Consultant and a frequent guest on CNBC. Mr. Johnson attended Penn State University, where he received a Bachelor of Science degree in finance.