Join and support Laurence Kotlikoff for President

Our country is in deep trouble and our politicians are making things worse. It's time for bold new leadership to fix America.

Our Kids Are Us

If there is one central concern of this campaign, it's the terrible future we are leaving for our children. It's a future of second-rate education, significant high school dropout rates, huge college debt for the remarkably few completing college, high unemployment, low-paying jobs, enormous fiscal obligations, and a financial system that can't be trusted.

The first step to changing this situation is realizing that our children, not our toys and other possessions, are us. Whatever the afterlife may hold, our children are our earthly future. They are our most cherished possession, and each of them belongs to each of us. We are our children's keepers.

This is why when I talk about our educational, economic, and fiscal child abuse, I'm not talking just about how we are treating our children. I'm talking about how we are treating ourselves. If we damage our children's futures, we damage and diminish ourselves as well.

The two parties have focused our attention on one dimension of our differences -- rich versus poor. But we need to think about two dimensions, rich versus poor and old versus young. Under cover of a struggle between the rich and the poor, our government has spent decades taking from the young and giving to the old. It's taken from rich young people, middle class young people, and poor young people and given to rich old people, middle class old people and poor old people.

Again, these "people" are we and our children. Our government is taking from our children -- not Russian, Chinese, or French children -- and giving to us. The question is how much we want our government to take. That's a question no politician has raised or raised much in six decades because they've assumed we don't care about our children. Nothing could be further from the truth. In fact, we care more about our children than anything in the world.

Now some redistribution across generations makes sense in an economy where living standards are rapidly growing. So asking our children to help us out to some extent is not the worst thing to do. But if we spend six decades, under each administration, taking more and more from our children, either in the form of taxes or borrowing that our children will have to repay, we can reach a point where our children's living standard ends up lower than ours. Such a policy means the end of the American dream -- which is not a diminishing or even stable living standard for future generations, but a rising one. And, make no mistake, our policies are killing the American dream.

Our policies will also blowing up in our own faces by severely damaging our economy. That damage is clear in our national saving and net domestic investment rates, our low growth rate, and our low rate of wage growth. Countries that don't save, don't invest, and countries that don't invest, don't grow or experience significant wage growth. Our country is now saving literally nothing and investing next to nothing. And the reason we are saving nothing is, in very large part, due to our policy of taking ever more resources from the young, which they would otherwise save, and giving it to the old, which they are spending (in large part because it's coming in the form of in-kind consumption, specifically medical goods and services that can't be saved).

Does all this mean we should eliminate our generational policies, including Social Security, Medicare, and Medicaid? Absolutely not. We have tens of millions of older Americans either wholly or in large part dependent on these policies. What it does mean is we need to reform these policies so their benefit levels don't continue to grow faster than per capita output.

In 1960, Medicare and Medicaid didn’t exist and Social Security benefits per elderly (those 65 and older) were relatively small compared to per capital GDP. Today, these benefits (including state as well as federal Medicaid spending, but only the part of Medicare and Medicaid spending on those 65 and older) total 72 percent of per capital GDP and will hit roughly 85 percent when the baby boomers are fully retired.

In 1960 the average consumption of 70 to 79 year-olds in 1960 was 86 percent of that of 30 to 39 year olds. In 1981, it was 114 percent. In 2003, it was 139 percent. And In 2007, it was 144 percent. This growth in relative consumption is even more pronounced among older age groups and is also significant among those 50 to 59.

You see in these numbers both the great success of these programs and the tremendous problem they present. If we continue to let these benefit levels grow more rapidly than per capita GDP -- and make no mistake, that's precisely what we're doing, we'll quickly reach a point of severe crisis, very similar to the crises we're seeing today in Greece and Italy.

The Social Security reform I propose (www.thepurplesocialsecurityplan.org) leaves benefits for those now retired unchanged, but transforms the system for middle aged and younger people so that it achieves its legitimate purpose while no longer threatening the American dream. The healthcare reform (www.thepurplehealthplan.org) recognizes that every American needs and deserves a basic health plan, but that we can only spend a fixed share of GDP each year giving everyone a basic plan. My proposal calls for spending 10 percent of GDP on a uniform basic health plan for all Americans -- young and old, rich and poor.

Ten percent of GDP is a very high share for a basic health plan. Germany and Switzerland spend about 11 percent of GDP on all healthcare. On some measures, their health outcomes are better than ours, even though we spend almost 18 percent of GDP on healthcare. Ten percent of GDP is what federal and state government now spend on healthcare. I'm proposing keeping government healthcare spending at that same share of GDP. The Congressional Budget Office is projecting this government healthcare spending share will rise to 23 percent of GDP over time. That spells sure economic collapse for our country.

Please understand, I'm not proposing restricting the total share of GDP spent on healthcare. If people want to buy supplemental insurance policies to cover things not covered by the basic policy, they would, under the Purple Healthcare Plan, be perfectly free to do so. But the government spending -- federal and state combined would be capped at 10 percent of GDP because that's all we can afford to spend at the government level.

As you'll read at www.thepurplehealthplan.org, this plan is not socialized medicine. The provision of healthcare remains fully private. And what's being proposed is very similar to other reform plans being advanced by both parties. The main point of difference is that the Purple Health Plan lives within a strict 10 percent of GDP budget going forward and provides everyone - our children as well as ourselves -- with the same basic plan. This doesn't mean we'll be spending the same amount on our children, who are, on average, healthier, than on ourselves. It means we'll recognize that if a 15 year old has a particular health problem, she or he should receive the same basic healthcare for that problem that an 85 year old with the same problem receives.

Again, these children are our children. Who among we older folk would wish to claim that we should receive better, indeed far better, basic healthcare than our children. Such a policy would hurt us no less than it hurts our children, again for a simple reason -- our children are us.

In considering the Purple Social Security and the Purple Healthcare Plan, please focus on how we treat the young versus the old. There is another policy -- the Purple Tax Plan -- to ensure that the rich young pay much more, as a share of their economic resources, than the poor young, that the rich middle aged pay much more, as a share of their economic resources, than the poor middle aged, and that the rich elderly pay much more, as a share of their economic resources, than the poor elderly.

There is absolutely no question that the rich in any given generation should pay disproportionately more. We need a progressive tax-transfer system. There is clear consensus throughout the land on this issue. What we don't want, but now have, is poor children paying for rich elderly. That would end under my administration because we'd have policies that are fair both within and across generations. These policies would be sustainable and restore national saving, domestic investment, and economic growth to the economy.

Why Kotlikoff in 2012?

Our country's problems are severe and getting worse. No candidate has all the answers. But the problems we face are primarily economic ones and may be better addressed by someone who has spent his life focused on our economic problems and their solutions. No economist has, to my knowledge, ever run for President. In recent years, we've had a nuclear engineer, an actor, two businessmen, and two lawyers. In their hands, the economy has done very poorly on a number of critical dimensions. In particular, none has come to grips with the country's long-term fiscal insolvency.

We've also been very badly served by the two parties' primary concern -- obtaining and maintaining power. This may work for them, but it's certainly not working for us. It's time to elect someone with fresh, bold ideas that will appeal to all segments of society -- someone with the courage to both articulate and implement what's really needed to fix America.