The need for entitlement and tax reform

If you’ve yet to be convinced about the need for tax and entitlement reform at the federal level, perhaps you’ll be persuaded by a man who once “made a billion dollars in one day” (even if he worked with George Soros to do it). The latest Bloomberg Businessweek features this exchange with Duquesne Capital founder Stanley Druckenmiller.

Tell me why you’ve been talking to college students about the burdens they’ll face?
The way our entitlement system works isn’t pay-as-you-go. Current workers pay for current seniors. This is alarming because of the Baby Boom. We’re creating 8,000 new seniors every day. And we’re only producing 2,000 young adult workers to support them. It’s not that I’m anti-entitlement; it’s that I’m for sustainability of entitlements. Over the next 10 years—and this is the administration’s optimistic budget—Social Security, Medicare, and Medicaid is going to grow by $780 billion. The growth in spending on children is going to be $20 billion. I think it’s unfair, most of all.

How do you begin to correct this generational imbalance?
I have my own opinions, and I have suggestions, but the answer to your question needs to be fought out in the political arena. If you’re asking for my suggestions, the first thing we’d have to do is the really low-hanging fruit. You can means-test to a greater extent Medicare. You can certainly means-test Social Security. We haven’t even done that.

You have some suggestions about tax reform as well, right?
I think raising capital-gains rates and dividend rates to match income rates while you simultaneously lower corporate tax rates to zero would make the economy grow dramatically and increase government revenues. Corporations are owned by shareholders. If you tax the shareholder, you’re taxing the ultimate beneficiary. And corporations can’t come into our lives for a tax break; their rate is zero. By the way, there are a lot of companies, as you know, already paying zero.

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