David Brooks has a column in the New York Times arguing for the imposition of a consumption tax in part on the basis that:
Unlike in 1986, the baby boomers are now in full retirement mode. The aging population means more government spending, even if we get entitlement programs moderately under control. It also means slower growth. The United States grew at about 3.2 percent a year for the five decades after World War II. It is projected to grow at only 2.2 percent over the next few decades.
I've heard the assumption that retiring or aging baby boomers means more government spending, but who knows whether that necessarily must be true. After all, the baby boomers worked and saved during that period of American prosperity and growth after World War II. A lot of them probably have houses with paid-off mortgages that are worth a lot more than they were when they were first bought, and they have benefited from the growth in the stock market in the past 30 years. They also are a generation that has known about the risks of smoking and the value of exercise for longer than previous generations. Sure, these folks are going to collect some Social Security and use some Medicare as they get older and sicker, but they, for the most part, unlike younger people, won't be committing violent crimes or using public schools or Pell Grants. So it's not clear that a group of relatively prosperous and healthful retirees is a grave threat to the nation's fiscal health or a cause to raise taxes, particularly if we can replenish the workforce with some reasonable combination of pro-natalist or pro-immigrant policies.
As for the claim that America "is projected to grow at only 2.2 percent over the next few decades," I don't take such projections very seriously. Who, in the 1970s, would have predicted the growth of the 1980s and 1990s? Who, in the 1930s, would have predicted the growth of the 1960s? There's a kind of false precision about the "2.2 percent" figure that gives it a veneer of authority, but anyone who claims to imagine the growth rate for America decades in advance down to the tenths of percentage points is just kidding themselves. For one thing, as Mr. Brooks seems to acknowledge, it's contingent on government policies.
Finally, there's at least one other way that America today is unlike America in 1986 that Mr. Brooks does not acknowledge, which is that in 1986 we were in the midst of an expensive Cold War military build up. If Reagan managed that without imposing a consumption tax, it's not at all obvious that the country needs such a tax now to handle retiring baby boomers, a somewhat less menacing threat than Soviet tanks and nuclear missiles.
