While Social Security and Medicare may seem like far-off issues for college students, former Governor of the State of Maine Angus King warned that students should be concerned about federal deficits now, because they-literally-will pay for them later.
Upon hearing King's talk on the U.S.'s deficits, inevitable economic obstacles, and unappealing solutions, Greg Kelsey '05 said, "I'm worried about the money I am going to have to pay in 10 or 20 years. I'm worried about what's going to happen."
Indeed, King said the college student generation will likely pay significant costs-a tax increase of 40 to 50 percent or the loss of Social Security altogether-to reduce the federal deficit. "We're spending now and handing the bill to our kids," King said.
According to King's research, the federal deficit is increasing at a rate of $1 million per minute; at the time of the talk, the estimated total national debt was around $650 billion. "That's $24,000 per person," King said.
King said deficits are increasing because people have an increased sense of entitlement and demand benefits like Social Security, Medicare, Medicaid, and income support programs. "Federal spending-just for our operating costs-has gone out of control," King said. "It's not like we're building a house and having our kids make payments on our investment, it's like we're vacationing in Acapulco and sending them the bill!"
At the same time that federal spending increases, recent tax cuts also contribute to the deficit, King said. "We're spending more than we take in. It's like a family earning $40,000 and spending $50,000."
"Deficits are okay sometimes," King said. "To invest in capital, or in times of recession, or war, they stimulate the economy. They're not okay simply to operate."
Demographic changes are also a significant factor: there are proportionately fewer people working to support Social Security.
King said there are significant economic dangers associated with large deficits. "Interest rates will always go up. I don't care how you do the math, they'll always go up. It's an issue of supply and demand."
Another risk arises when the government sells bonds to fund its debt, and foreigners buy large amounts. "China owns 40 percent of these bonds. Do we really want to owe foreign countries that much money?"
"People say, so what's the problem, what's the worst that could happen? And I say, I've got one word for you: Argentina," King said, referencing that country's economic collapse in 2001.
While economic collapse seems unlikely, losing Social Security or other programs is a probable possibility, King said.
After hearing King's speech, Allison Milld '04 said, "I'm not upset that I'm paying Social Security now, and I may not have that benefit, but I wonder what will happen."
"I don't think it's an issue for people my age, but it should be," Erin Philipson '04 said. "Right now it seems too distant...but scary too."
King's Monday evening lecture was supported by the Donovan Lecture Fund, established in honor of former Bowdoin government professor John Donovan to support lectures in political science.