Invest in Our Children or Pay the Price Later

TIM BAKER

March 16, 1992|By TIM BAKER

Children have become the most dramatic example of America'sunwillingness to invest in its own future. According to a recent study in Science magazine, aggregate federal, state and local spending on programs for them have increased at only half the rate of spending on programs for adults over the last 30 years. During the same period, children's health, happiness and educational performance have all suffered.

One out of five of our children -- 12.6 million of them -- grow up in poverty. Indeed, the young are much more likely to be poor than any other age group. Children under 6 years old are twice as likely to live in poverty as adults over 65.

The consequences are already undermining the country's economic base because human capital has become the most important economic asset. A highly educated work force will be the key factor in productivity. Here's one indication of how we're doing: American businesses have to spend $500 million a year on remedial-reading textbooks for their employees.

Our short-sighted investment priorities will continue to haunt us for years to come. Consider the impact on the inter-generational economic collision toward which we are headed.

The government provides the elderly with massive and politically untouchable subsidies. Federal spending on them accounts for 47 percent of all appropriations other than defense and interest on the national debt. Over the years, their entitlements have increased 75 percent faster than average wages. This subsidy adds up to 7.7 percent of Gross National Product.

Of course, many older people believe that they have paid for ZTC their benefits with years of Social Security taxes. But, in fact, the taxes paid by them and by their employers, plus interest, only cover about half the average retiree's benefits. That doesn't even count Medicare, the cost of which has risen from 1.3 percent to 2 percent of GNP in the last 10 years.

Even excluding Medicare, the total transfer payments from the federal government to the 31 million retirees amounts to 16 percent of aggregate American payrolls. This burden is borne by the country's present work force of 120 million men and women. So at present, each retired person is supported by four workers.

These programs have worked. Poverty rates among the elderly have fallen rapidly. People over 65 have higher household net worths, higher per capita after-tax incomes, and a lower poverty rate than any other age group in the country.

What will happen, however, when the ''baby boomers'' -- the demographic bulge of people born between 1946 and 1968 -- begin to retire? At that point, the ratio between retired people and the workers supporting them will shrink. By 2030, it may have fallen to 2.3 workers per retiree. By then, the subsidy will have grown to 25 to 30 percent of payrolls, according to estimates by The Economist. In the meantime, health-care costs will increase as people continue to live longer. Medicare by itself could take another 20 percent out of payrolls.

This simply isn't going to work unless the productivity of the American worker increases much more rapidly than it has over the last 30 years. Those increases cannot be achieved without substantial and sustained investment in today's children. But the country seems unwilling to pay for it.

This basic economic investment issue now confronts the General Assembly. Will our politicians in Annapolis have the fortitude and vision to meet the challenge? Are they willing to raise taxes to pay for necessary programs? For example:

* APEX: The four-year Action Plan for Educational Excellence is supposed to pump an additional $180 million into the state's poorest public-school districts next year. The money would reduce, but hardly eliminate, the present $2,580 disparity in per-pupil expenditures between the wealthiest and poorest districts.

House Republicans propose cutting APEX, but the governor, the Senate and the House leadership support full funding, and it looks secure at this point. APEX's impact, however, will be diluted if the legislature makes other cuts -- $55 million in state funding for local school transportation and $27 million for non-public special-education placements -- without giving the counties the additional taxing authority to make them up. Baltimore will need a $30-$40 million disparity grant for the same purpose.

* Extended elementary-education program: These pre-school programs are modeled after the effective federal Head Start program. They bring at-risk children to grade level by third grade. Last year's budget cuts closed nine sites. Without new taxes, the entire program may be shut down.

* Maryland's tomorrow: Maryland has one of the highest drop-out rates in the country. But the Schools for Success drop-out prevention program was cut by $1.4 million last year.

* Local health-department services: More than $12 million in state funding may be cut from prenatal care, family planning and child health-care services performed by local health departments which service 120,000 children who do not have any health insurance.

* Higher education: A college education remains the most effective economic escalator for young people, and public research universities are key economic engines in a knowledge-based economy. Yet the University of Maryland has taken a beating in every round of budget cuts since the recession began. The legislature should begin to restore some of that funding, especially at College Park.

These programs cost money. They require new taxes. If we can't find the political will to make these investments in our children, we'll pay a bigger price down the road.

Tim Baker writes on issues of city and state.

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