Are Today’s Preschoolers the Cure for What Ails Social Security?

Investing in Early Education Could Fund Baby Boomer Retirement Checks

Political leaders have a habit of postponing the kind of serious reform of Social Security economists say needs to occur if the system is to avoid bankruptcy in coming decades. One reason for the delay is the unpopular choices, such as trimming benefits many know may be required in any serious reform effort. Meanwhile, researchers and business interests are stepping up to offer a solution that is both popular with voters and effective: invest in early childhood development programs.

A report from Washington College economist Robert G. Lynch says that, without a public investment in high-quality early education, today's disadvantaged children will be "less skilled, less productive, and earning less…less able to help sustain our public retirement benefits systems such as Social Security."

In "Early Childhood Investment Yields Big Payoff," Lynch calculates the costs and benefits of implementing a high-quality, publicly funded early childhood development program for all poor 3- and 4-year-olds nationwide. Drawing on earlier research that tracked the outcomes from the Perry Preschool Project, Lynch found that a national system of publicly funded early childhood education programs would produce benefits that begin to outpace costs in year 17. By 2050, the last year considered in the study, total budget savings would be $167 billion.

Lynch's estimates factor in both the expense of the early education program itself as well as the higher cost of educating more college students. It does not, however, take into consideration the likely added effect of investing in future parents who would be able to provide more education to their own children, something that could lower early education spending in the future.

With the current level of preschool funding, the researchers predict we can look forward to a stagnant economy, higher crime, lower tax revenues, migration of jobs overseas and staggering investments in social programs for aging baby boomers and the poor. It's a choice between paying some now or paying much more later. After all, today's 4-year-olds will become employed, tax-paying citizens not long after the Social Security trust fund begins to run deficits, by some estimates in 2018.

That drain, and the one created by higher Medicare and Medicaid costs, could ultimately break the federal budget. The Committee for Economic Development's Invest in Kids Working Group projects that total federal spending will surpass revenues by about $44 trillion in today's dollars. In practical terms, this spending gap will double the tax burden placed on the average 3-year-old throughout his lifetime.

Says Robert Bixby, executive director of the Concord Coalition, "There's a real fiscal witches' brew out there waiting to confront these kids. We need to be good generational stewards to make sure this doesn't happen."

CED also estimates that the $20-$25 million funding currently going for early care and education programs would need to more than double to provide access to free, part-day, part-year preschool programs to all children age 3 and up, including nearly 3.5 million kids who are not in center-based care. What's more, they argue that the overly complicated process of serving young children through separate federal programs makes it harder for states trying to build comprehensive, coordinated early care and education systems. They favor an integrated system with shared resources, missions and goals.

If business people and politicians generally agree on the need to fix Social Security and invest in preschool, why hasn't prekindergarten become a national priority? Robert Dugger, managing director of Tudor Investments and head of the Invest in Kids Working Group, says that everyone--individuals, corporations, elderly, young, rich, poor--will have to share in the pain, and that's not typically a popular idea. But suffer we must because within four years, Congress will face an authentic spending crisis.

"This crisis cannot be fixed like it was in 1995-96. It's going to be pervasive and unfixable without making some very hard choices," Dugger says. "We need to make adjustments that maximize the future growth of this country and doing that means massively increasing investments in [the years encompassing] prenatal to five."

While Dugger isn't against funding Social Security, Medicare or Medicaid, he does believe we should stop doing so at the expense of early education. CED is among many business interests throwing their weight behind investment in early education. Others include the Economic Policy Institute (EPI), The Business Roundtable and the Concord Coalition, a nonpartisan group that supports responsible fiscal policy. At the state level, business groups in California, New York, Pennsylvania, Colorado, Iowa, and Connecticut among others are also marshalling support. The Los Angeles Area Chamber of Commerce recently took the unusual step of publicly endorsing a proposed tax increase to fund universal preschool in California.

Bixby likens the situation to the disaster-in-waiting that was New Orleans. "It's an object lesson in preparing for the future," he says. "Any number of fiscal experts on the left and the right will tell you we have this huge demographic problem and the economy will be hugely challenged, and yet we don't do anything about it because it's inconvenient to make short-term sacrifice for long-term gain."