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The Long-Range Social Security/Medicare Deficit: $72 Trillion And Counting
by Forbes • August 11, 2015
By John C. Goodman for Forbes
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The Social Security/Medicare Trustees have issued their latest reports and they are not easy reading for the uninitiated. I suspect most of the Trustees hope you don’t read them at all. They prefer their own spin. Under both Republican and Democratic administrations, these reports are invariably accompanied by a press release that completely ignores what is important and focuses instead on what is unimportant.
What’s unimportant? The trust funds and when they will run dry. Like most social security systems in the world today, ours is a pay-as-you-go system. Nothing has been saved or invested. What we call trust funds consist of nothing more than IOUs the government has written to itself. (More on that below.) Yet, that is what the official press releases emphasize and this focus is reflected in the first graph below.
What’s important? Cash flow. In fact, in a pay-as-you-go system, cash flow is the only thing that matters. As the second graph shows, Social Security and Medicare are paying out more than they are taking in. As the baby boomers retire, the total deficit will grow dramatically. Currently, we are using about one in every seven general revenue dollars to cover these deficits. By 2020, we will need more than one in five. By 2030, we will need about one in three.
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Like most Ponzi schemes, eventually the suckers’ money runs out.
And, all the politicians and bureaucrats from FDR are going to be long gone.
So what should be done about this and ALL the unfunded liabilities?
At the very least, everyone should REALIZE that the current system is unsustainable.
Even a fat old white guy injineer or a reasonably competent accountant can demonstrate that there ain’t no free lunch.
- Old advice: “when in a hole, stop digging” seems to apply here.
- Hard stop on all new “pensions”. Require all such to be fully funded!
- All plans must “mark to market” with honest accounting.
- “Chile” style social security reform
- Congress must live within what the taxpayers can afford
- Any deficit is paid for my Congress folks personally