I was perusing a report from a Federal Reserve Conference that Jekabs and I both attended last November. The topic was the state of the economy and how the fed planned on intervening in the future. In reality, this conference played more like a horror movie convention rife with gloom and doom.
Here is a little nugget filled to the brim with a dash of gloom and a heaping tablespoon of doom:
•75-year unfunded liabilities from entitlement programs sum to $40.3T.
–Social Security $4.3T
–Medicare Part A $12.4T
–Medicare Part B $15.7T
–Medicare Part D $7.9T
–Medicare represents almost 90% of the problem. Privatizing SSN will not work-reduce deficit.
To summarize, projected revenues for Social Security and Medicare falls short of expected budget needs by $40.3 trillion over the next 75 years. Again, that figure does not represent the total amount required to fund the programs through 2084. The programs will be in the red by that amount.
So, how do we as a country close the gap? Here are two viable options. I use the term "viable" very loosely:
•Total per-capita entitlement debt of $330K –to close gap.
•Could raise indiv. Income tax rates by 85%.– (Relative to current 8.9% of GDP)
–This is a static estimate•
could cut discretionary spending by 97%.– (Relative to current 7.8% of GDP)
•could make no tax or spending changes.
Your eyes do not deceive. We would need to either raise individual income tax rates by 85% or reduce discretionary government spending by 97%.
Have a good weekend!!
'Have a good weekend' with a dash of gloom and a heaping tablespoon of doom? :)
ReplyDeleteCertainly, it seems that the Medicare and Social Security promises are unsustainable in the long run. Certainly either benefit cuts or retirement age increases are coming in a few years. When we discuss this issue in my ECON classes, we invariably discuss (A) what is the proper role of the government with respect to guaranteeing the retirement benefits to the elderly, and (B) what are conceivable 'good solutions' to the current problem.
My personally held view is that (A) government should NOT be in the business of guaranteeing retirement benefits for the elderly, and (B) that the only good solution is a discontinuation of Social Security and Medicare, the sooner the better, with an immediate payment of the present value of the so-far-promised retirement benefits to each person to whom such promises have been made (This is approximately the late Milton Friedman's view).
Medicare is the best example of socialism in America in my opinion. Our governments first attempt in socialized healthcare. This article makes me worry. Apparently we have failed at Medicare. Now the government wants to have healthcare for all individuals. I'm sure that they will follow the same plan as they did with Medicare and we will all be in heap of trouble then. Delinda W.
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