ARROYO GRANDE, Calif. (MarketWatch) -- Six years ago, Peter Orszag, President Obama's new budget director, co-authored a Brookings Institution study that concluded: "Balancing the budget would require a 41% cut in spending on Social Security and Medicare, a 47% cut in discretionary spending, or a 17% cut in all non-interest spending." It's getting worse: Today entitlements eat up 40% of the federal budget and are growing.
No doubt Orszag's earlier thinking had a lot to do with why Obama picked him. But it's also a signal of what we can expect when a Social Security reform bill is sent to Congress during Obama's "first 100 days." And that will trigger a brutal battle. Why? Because AARP's 35 million members will fight all benefits reductions while young voters who put Obama in office will fight any new Social Security taxes.
Bruising battle? It won't matter. In the long term, reforming entitlements will be like rearranging deck chairs on the Titanic. Remember, Obama's adding a $1 trillion stimulus package on top of what Nobel economist Joseph Stiglitz calls a "$10 trillion hangover" of debt left by former President Bush and the economic meltdown. And all that's on top of the massive $60 trillion to $75 trillion of unfunded Social Security and Medicare liabilities.
To get perspective, let's shift our thinking into a parallel universe: Into Chris Buckley's satirical novel "Boomsday," which goes way beyond acceptable government policies. He offers a bizarre solution to reforming Social Security, a solution that forces all of us to focus, and not just on the out-of-control economics of retirement entitlements. He forces us to focus on the one core problem overshadowing all other global economic issues: Population growth.
Too many boomers and babies in this equation
Yes, population is the core problem that, unless confronted and dealt with, will render all solutions to all other problems irrelevant. Population is the one variable in an economic equation that impacts, aggravates, irritates and accelerates all other problems. Imagine you're on a call with the Oval Office:
"Listen to me," the frustrated U.S. president says on the phone in "Boomsday:" "I got a collapsing economy. I'm fighting four wars -- and looks like another is on the way." Agitated. "I got melting ice caps on both poles. Florida just lost another two feet of waterfront. Hundred square miles of Mississippi just went under." Faster. "I got a drought in the West the Interior Department says is going to make Colorado and Wyoming into another dust bowl." Breathless. "Pakistan and India are going at each other like a couple of wet cats. The CIA's telling me Israel's preparing to launch nuclear weapons." He's shaking. "I don't have time to take on a one-legged senator who says the solution to Social Security is for us to kill ourselves at age 70. The way I'm feeling now, I may shoot myself. And I may not wait until I'm 70."
Yes, you heard right. He's reacting to a proposal made by Cassandra Devine, a character in "Boomsday." She's a young, hot PR hustler running a "must read" blog. She resents the fact that her generation is getting stuck with the tax bill to pay Social Security benefits for retiring boomers. At first, her proposal was just a wake-up call, a shocker to get attention, to get Washington to deal with a hot-button issue politicians refuse to face. Her plan: Reduce population by encouraging suicides for aging boomers.
Bogus math and economic equations
OK, so suicide's a bizarre, unacceptable solution. But "Boomsday" does put the problem in sharp focus: No, it's not "peak oil." Not global warming. It's the population explosion: Too many people, old and young, boomers and babies too. More and more people filling up our little planet.
And while she proposes eliminating boomers, throughout history other writers, warriors and governments have dealt with the other end, limiting births -- from family planning, infanticide, even genocide. Yet few expect change at either end of this spectrum. Indeed, a United Nation's study estimates the world population will continue exploding, from 6.6 billion to 9.3 billion by 2050!
And not only will there be about 50% more people on the planet before today's kids reach the age of the youngest boomers today, but every year they'll also be demanding more opportunities, more benefits and more resources for their personal economic growth as well as for the expansion of their national economies. Warning: by 2050 America's 400 million will be vastly outnumbered by 8.9 billion others across the planet, all competing with America.
In short, within four decades human demands will easily double. That makes population growth the key variable in every economic equation ... impacting every other major issue facing world economies ... from peak oil to global warming ... from foreign policy to nuclear threats ... from religion to science ... everything. Population is the No. 1 variable in the economic equation.
And here's how an exploding population will remain the key variable driving all other major economic issues in the next four short decades:
1. Global wars ... over food, water and energy
Five years ago Fortune reported on "The Pentagon's Weather Nightmare." Yes, from inside our military comes a warning of "the mother of all national security issues." As "the planet's carrying capacity shrinks, an ancient pattern reemerges: the eruption of desperate all-out wars over food, water, and energy supplies." But ask yourself: What if nations prioritized population control policies to minimize growth and reduce demand?
2. 'Global warming' ... and nuclear threats
Will it work? In the latest Foreign Policy magazine, environmental economist Bill McKibben, author of "The End of Nature," warns: "It might already be too late ... to save the planet from a climate catastrophe." The International Energy Agency's answer is more supply to feed exploding demand: The world must spend "$45 trillion to build 1,400 nuclear power plants and vastly expand wind power" in order to "halve greenhouse gas emissions by 2050." Their supply-side obsession assumes three billion more people. But what if we focused on cutting demand by stabilizing world population at 6 billion?
3. 'Peak oil' ... versus 'peak population'
Experts warn that "The Age of Oil" is over. Soon the marginal cost of extracting a barrel will equal the sale price. We are on the downside of the bell curve. Special interests like Exxon-Mobil and the Saudis disagree.
But check sites like LifeAftertheOilCrash.com: "Civilization as we know it is coming to an end soon. This is not the wacky proclamation of a doomsday cult, apocalypse bible prophecy sect, or conspiracy theory society. Rather, it is the scientific conclusion of the best paid, most widely respected geologists, physicists, bankers and investors in the world. These are rational, professional, conservative individuals who are absolutely terrified by a phenomenon known as global 'peak oil.'" Warning: We're near the tipping point: Stabilize population or self-destruct.
4. Alternative energies, 'political will' and lobbyists
Wall Street, Washington and Corporate America hustle the myth that we must become "energy independent." History suggests narrow special-interest lobbyists will dull the "political will to act" till we pass the point of no return. Our population will grow from 300 million to 400 million by 2050, but the rest of the world will add another 3 billion, with all demanding more economic resources to meet burgeoning demands for energy, food and water. If the world's population isn't addressed, we'll be outnumbered and outgunned.
5. The mythological math of 'economic growth'
Economic equations stumble on bogus data. Last spring political historian Kevin Phillips wrote a brilliant Harper's article "Numbers Racket" warning us that "the economy is worse than we know." Politicians use "deceptive statistics" to sell "Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it really is. The corruption has tainted the very measures that most shape public perception of the economy."
Making matters worse, economists are part of this conspiracy, tacitly endorsing government propaganda about progress.
Evolutionary geologist Jared Diamond put all this in perspective in his Pulitzer Prize-winning "Collapse: How Societies Choose to Fail or Succeed:" "One of the disturbing facts of history is that so many civilizations collapse. Few people, however, least of all our politicians, realize that a primary cause of the collapse of those societies has been the destruction of the natural resources on which they depend. Fewer still appreciate that many of those civilizations share a sharp curve of decline. Indeed, a society's demise may begin only a decade or two after it reaches its peak population, wealth and power."
What's the one common reason societies, cultures, nations have collapsed across the world and throughout history? Leaders "focused only on issues likely to blow up in the next 90 days," lacking the will "to make bold, courageous, anticipatory decisions." Their short-term thinking, unfortunately, sets the stage for a rapid "sharp curve of decline."
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