"Running on Empty" by Peter G. Peterson

The drug bill is fantastically expensive. Shortly after the law was enacted, the White House put the 10-year price tag of the plan at $535 billion (substantially more than the $400 billion it had allowed Congress to believe the bill would cost). But because drug prices are rising sharply, and because Americans are retiring at an increasing rate, the program is projected to become more and more expensive as time goes by. In its second 10-year period, the plan will cost "well over $2 trillion," Peterson notes. According to the trustees who manage Medicare, by the year 2078, the program's spending on prescription drugs will grow to 3.4 percent of the economy -- close to what we currently spend on defense. Because the plan includes large gaps in coverage that Congress is expected to fill later, the figure could rise even more than that.

Most Democrats in Congress voted against the White House's prescription drug plan. (John Kerry missed the vote while campaigning, though he opposed the bill.) Among other things, they noted, quite reasonably, that because the federal government was signing up to pay for large quantities of prescription drugs, it should have forced drug makers to lower the cost of medication, something the president's bill expressly forbids. Purchasing drugs at a discount would have allowed better coverage for seniors at a better price for the government. It is not clear, though, how much more cost-effective a Democratic plan would have been -- plainly, when you're talking about offering a huge number of senior citizens prescription drug coverage, you're talking about a lot of money, whatever discounts you manage to secure.

Should the nation really be providing all senior citizens -- even wealthy ones -- with access to prescription drugs? How much of senior citizens' healthcare should the federal government be responsible for? Given the long-term problems we face, can lawmakers really justify adding another open-ended entitlement to the books, one projected to steadily eat up more and more of federal spending? And if we're spending money, isn't it better to pay for the healthcare of children rather than seniors? These are, to be sure, indelicate questions; in America, senior citizens are sacrosanct, and suggesting that caring for all of their needs -- especially their health needs -- might simply be too expensive is, politically, way beyond the pale.

This is, however, a discussion we've got to have, Peterson says. The industrialized world is in the midst of a profound demographic shift, with seniors steadily increasing as a share of the population and younger people steadily declining. "Been to Florida lately?" Peterson asks. "You may not have realized it, but as you gazed upon the vast concentration of seniors there -- nearly 18 percent of the Sunshine State's population -- you were looking at our future. By the mid-2020s at the latest, the United States as a whole will have an age structure as old as that of Florida today." As this occurs, it seems only reasonable that we discuss, frankly and openly, how we should spend our resources.

Currently, most federal benefits are awarded to seniors; the average older person, Peterson says, "receives seven times as much in benefits as the average child (and this includes all child-related outlays, even nonbenefits like education)." As seniors begin to make up an increasing share of the population -- as the nation begins, in other words, to look like Florida -- this imbalance should start to worry us: We will be spending an increasing share of our money on what Peterson calls the past -- on people who've already lived their lives -- rather than on the future. Is this the America we want?

The ideas that Peterson proposes to fix this situation are complex, as you'd expect when dealing with such a mammoth problem. He suggests a mix of tactical measures (such as re-indexing Social Security benefits to the price level rather than to wages, or "affluence-testing" benefits, so that the wealthy receive less money than the poor) and broader, strategic changes to government. He wants to reform the way we write budgets, the way we draw up congressional districts, the way we fund campaigns. Not everyone will agree with all of his proposals, and some people -- especially liberals -- might disagree with all of them. Though he is comfortable with criticizing conservatives, Peterson is at heart a Republican, and his solutions are firmly planted in Republicanism; he is fond of market-based mechanisms, and he is not a fan of trial lawyers.

But Peterson's specific solutions aren't as important as the problems he diagnoses. The fiscal outlook is untenable. We are in trouble. Something must be done. "It will take a rare combination of bold presidential leadership and enlightened bipartisanship to forge a reform program equal to the challenge," he says. The trouble is, that leadership is nowhere to be found.

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