Government obligations for Social Security and Medicare may soon exceed the combined net worth of every household and nonprofit organization in the country.
By Scott Burns
Prices dropped last year. But we still need to invest to protect ourselves from inflation. That's why our retirement-plan investing needs an inflation "tilt." You'll understand why in a few paragraphs.
How bad will future inflation be? I don't know. Neither does anyone else. It could be a normal inflation of 3% to 4% a year. It could also be a banana-republic 10% a month.
What we know is that all governments make promises they can't fulfill. Our government certainly has. Under both political parties, it has taken promise making to a high art. This is not hyperbole. The figures can be found in regularly published government reports.
Much worse than you probably think
The figures exist, but they are ignored. News reports regularly inform us of the growing federal deficit, projected at a stunning $1.75 trillion for fiscal 2009 and $1.17 trillion for 2010. But regularly reported, less visible government obligations have been growing much faster.
In the nearly five years from January 2003 to December 2007, the Medicare trustees reported that the unfunded liabilities of Social Security and Medicare grew by a stunning $10.4 trillion. The average annual growth topped $2 trillion.
That exceeds the expected formal deficit of $1.75 trillion this year.
In the 2008 trustees' report Here (.pdf file), the unfunded liabilities of Social Security and Medicare -- promises of future retirement and health care benefits -- total $42.9 trillion. In a few days, we should be able to read the 2009 report. It's a good bet that the unfunded liabilities will show an increase in the new report.
Ironically, payroll tax payments are still large enough that the Social Security and Medicare programs don't need every dime. The extra money goes into the program trust funds as Treasury debt. The actual cash is spent elsewhere. Basically, the employment tax has been subsidizing other federal spending. This has been going on since the 1983 "reform" of Social Security, a disaster chaired by Alan Greenspan, later the Federal Reserve chairman.
Today's deficits? That's nothing
Last year's Social Security trustee report estimates that OASDI (Social Security retirement and disability) and HI (hospital insurance), excluding book entry interest for the trust funds, will have more revenue than expenses until 2015. If higher cost assumptions prevail, however, the last year of positive flow will be 2010.
That's next year.
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Pick your ponzi scheme: unfunded liabilities, credit card derivatives, housing derivatives, the federal deficit, the trade deficit, they're all combining to make a tsunami of catastrophic proportions.
ReplyDeleteDebt is destroying the American consumer and government at all levels. Read your local newspaper.
ReplyDeleteIt no longer matters how much currency is printed and dumped into circulation. The underlying problem of debt remains.
Consumers cannot assume additional debt.
This policy has always ended in financial tragedy.
What is a good vehicle for one person to live in? A Chevy or VW van? Shower optional unless near a creek I guess.
ReplyDeleteI read an MSNBC article this morning that stated that Medicare would be given precedence over Social Security; this makes sense, they won't have to pay out as much for Medicare if people die of starvation. (sarcasm)
ReplyDeleteAnd nobody cares about the old anyway, politicians know they will be either dead or mentally incapable of voting, and we're all too selfish to take care of them at home. So we would rather subsidize 19 year old single mother's of 3, than take care of the people who took care of us.
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Hey Anonymous... You can count me as one who would rather ditch the old who created this debt (selfish baby boomers) and feed the young. They are the ones who are going to inherit this mess....
ReplyDeleteMoney Masters is from 1996 but explains exactly why we are going through this crap and who is behind it all. The same people tasked to solve the problem. The crooks at the private Federal Reserve. Almost comical if not so sad.
ReplyDeleteMM would have been an A+ presentation but instead it is a A-. Why? That damn pencil. He won't stop pointing that pencil at the camera and tapping it. Who ran the camera? I mean did someone at some point have the guts to tell the guy - stop it with that f###ing pencil!!! G. Edward Griffin - The Creature from Jekyll Island is a good alternative. No pencil tapping.
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