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US Candidates Ignore Looming Debt Crisis
code_rage writes "Carolyn Lockhead of The San Francisco Chronicle has written an article about one of the most important, but overlooked, political issues we are facing. Baby-boomers will soon begin retiring, which will result in a huge fiscal imbalance (deficits and debts). The article says that the present value of the anticipated debt is estimated to be between $40 trillion and $72 trillion, depending on the source. To put that in perspective, the current national debt is $7.3 trillion.""
Former Treasury Secretary Paul O'Neill commissioned a study (free PDF) that was written by Jagadeesh Gokhale and Kent Smetters. To give a sense of how serious the fiscal imbalance is, consider some of the painful measures that the study said would be necessary to balance the books:
- More than double the payroll tax, from 15.3% to 32% of wages
- Raise income taxes by two thirds
- Cut Social Security and Medicare benefits by 45%
- Eliminate all "discretionary" spending (including such constitutionally mandated government functions as the military and the judiciary)
Peter G. Peterson has written a book about the issue: "Running On Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do about It." He recently gave an interview at the Council on Foreign Relations. He prefers to express the issue in terms of cash flow, because Social Security and Medicare are "pay as you go" systems (there is essentially no trust fund). The cash flow impacts will be an estimated $783 billion in 2020, increasing to trillions later.
Peterson offers some concrete proposals in the interview, and offers some political cover to the candidates in saying "I have never thought that a political campaign is an optimum environment for serious discussion or practical proposals.
Former Treasury Secretary Paul O'Neill commissioned a study (free PDF) that was written by Jagadeesh Gokhale and Kent Smetters. To give a sense of how serious the fiscal imbalance is, consider some of the painful measures that the study said would be necessary to balance the books:
- More than double the payroll tax, from 15.3% to 32% of wages
- Raise income taxes by two thirds
- Cut Social Security and Medicare benefits by 45%
- Eliminate all "discretionary" spending (including such constitutionally mandated government functions as the military and the judiciary)
Peter G. Peterson has written a book about the issue: "Running On Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do about It." He recently gave an interview at the Council on Foreign Relations. He prefers to express the issue in terms of cash flow, because Social Security and Medicare are "pay as you go" systems (there is essentially no trust fund). The cash flow impacts will be an estimated $783 billion in 2020, increasing to trillions later.
Peterson offers some concrete proposals in the interview, and offers some political cover to the candidates in saying "I have never thought that a political campaign is an optimum environment for serious discussion or practical proposals.
O'Neil's report is nothing new at all. Social Security is and always has been a grand pyramid scheme that worked because America's population grew fast enough that enought people came in at the next level lowerer on the scheme and enough people died off of the top. People live longer and don't reproduce as much - so the pyramid begins to collapse.
The best solution may end up being Bush's "ownership society" where we transition from a cashflow scam to personal investment programs. The problem with this, and it is a very big problem is that there is little risk to a healthy chashflow scam and investments are by definition risky. The other problem is that the money would not be 100% under government control and congress could not use the money when other sources of revenues dry up as it uses Social Security today.
At the end of the day, this issue is of critical importance as I really don't look forward to watching my parents generation financially crush my daughter's generation under the weight of some social contract. Taxes suck. So do governments, but ours is much better than the alternative.
-- $G
But most Americans don't have a clue what is going on. I saw a billboard last night that said, "Remember, it's your money" -- and it was an ad for Bush-Cheney! The administration that insisted tax cuts were the prescription for times of plenty, for times of recession, for times of peace and times of war, has now seen the unwanted side-effects: a languid recovery, and a trillion dollars added to the debt. A budget surplus, the first in modern times, converted instantly to massive deficit.
Sometimes I wonder if there isn't a way to start talking about the debt as the balance on our nation's credit card. Maybe if we put overspending into terms that the average consumer could understand, and stuck to those terms, people could finally start to get it. This country produces $11 trillion of wealth every year, and, through our government, we are $7.4 trillion in debt. Maybe if we start comparing the government to a family that's making $110,000 a year, but is $74,000 in debt, we could have a real national debate about government spending. The question is not whether "it's your money," but whether, being $74,000 in debt, it's a good idea for you to get a brand-new credit card and go rack up another $4,000 on it every year -- as Bush and the Republican Congress are now doing.
Especially when massive, unavoidable costs are just over the horizon.
Grover Norquist has declared his goal of drowning the government in a bathtub, and his way of doing it is to spend it into oblivion. The Republican Party has sold out the country by signing on with this brand of destruction. What it's going to yield is not prosperity and limited government, but anarchy and -- very possibly, in the decades to come -- the end of America as an economically powerful beacon of freedom. When our children are serfs for the wealthy who have bought up the country, when the old are baking to death because we can't afford to buy them air conditioners, when the poor and the sick die alone because we can't provide them with basic health care, when the unregulated food makes us sick and the unregulated drugs are a crapshoot, when half the country will never be able to retire and will be forced to work at McDonald's and Wal-Mart until their bodies fail, I hope people remember the name of Grover Norquist, and who it was that put his theories into practice. One percent of this country will always enjoy all the best things in life, but everyone else will be wondering what it was like before our government was drowned, and if those folks back in the '90s and '00s knew how good they had it.
Bush talked about Social Security reforms at the convention.
The rest of the Federal debt is constantly overhyped. I remember in the 80s it was going to kill us all, and in 2000 we were going to pay it off on 10 years. Now it's going to kill us all again.
The solution is very simple: cut spending, grow the economy, reform Social Security into private accounts. Bush is saying he'll do all those.
The Social Security "obligations" can be retired by selling government land. The Federal government owns most of the land west of the Mississippi.
The perception is that politicians get re-elected by spending money in their constituencies. The aim of course is to spend tax dollars in whatever way will register with the largest group of voters.
As evidenced by the Bush administration, politicians really don't give a fig about debt - they care about getting re-elected. If a few billion dollars of deficit spending will bring in the votes, that's what they'll do.
Of course, voters aren't much different. I have yet to hear a fiscal conservative make a list of the things that they are prepared to forego in the name of debt reduction, only the things that everyone else should give up.
Three Squirrels
.. because the People ignore it, too.
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Ignorance of the issues concerning the National Debt lead to Big Profit on the part of Banks (and other Lenders) to whom the Debt is owed... so you can be damned sure that popular culture has no clue just deep in the red the nation is
In other words, its not enough to blame the politicians. Blame the people, and the Banks, too
; -- the corruption of government starts with its secrets. a truly free people keep no secrets. --
Corporations go bankrupt, and their investors lose everything they have invested when they do.
All these privatization of Social Security plans are scams devised by the filthy rich to have the stock markets flooded with capital so that THEIR investments will be massively increased in value. The investor class has their investment spike while the average worker is forced to pay a premium.
None of these privatization schemes offers any suggestions about what to do when the next Enron happens and people lose their retirement savings. Are we supposed to shake our heads at old people and tell them to starve in the streets because the senior management of the corporation looted all the value out of the company?
There has to be a safety net for the elderly and disabled in our society. Ensuring they have minimum standard of living is far more important than the investor class getting a huge increase in their account values from a massive sump of capital into the stock markets.
It would be a mistake to assume, as you apparently have done, that breaking the law necessarily demonstrates an ignorance of it. When I choose to reproduce copyrighted material, believe me that I am mindful of the consequences and consider the benefits to outweigh the drawbacks. And yes, I do sleep well at night; thank you for asking.
::: E.T.
The investor class declared war on the middle class and poor long, long ago. 90% of the wealth in the US is held by the top 10% and 50% of the wealth is held by the top 1%. I'm so tired of trying to point out that fact and hearing "CLASS WARFARE!" in response from right wingers.
NO... "class warfare" is all the policies since Reagan was sworn in that got almost all the wealth in this society in the hands of the investor class.
It's possible to start responsibly paying down the debt without any huge shifts in economic policy, Clinton proved that. The amount we pay on interest on the national debt every year is often less than the deficit itself, which implies that if we didn't have the debt now, we wouldn't get into more debt! So all we have to do is start paying it down, and eventually our interest payments will shrink as well.
As a percentage of the budget, it isn't that big a chunk, so we wouldn't have to cut back too much. As for Social Security, I suggest we raise payroll taxes and income taxes slightly, and/or possibly institute a small national sales tax on luxury items. Simultaneously, we can start saving the Social Security surplus for Social Security, instead of spending it on the rest of the budget--because we know we'll need that money!
So there; no drastic changes. It isn't all bread and circuses, but it's at least somewhat responsible and forward-thinking.
pb Reply or e-mail; don't vaguely moderate.
-End the "War on Drugs"
-Pull out of Iraq. Now.
-End military aid to ALL foreign coutries
-Stop development of Star Wars defense system and new nuclear devices.
----
This concludes our transmission to Oceania.
Just to be a bit dismal, I think you miss one of the key problems with both Medicare and Socical Security: Longevity.
When both Social Security and Medicare were conceived (heck most pension plans for that matter) life expectancy wasn't much pas age 65 or so. If you managed to live long enough, you could benefit from your company's penson plan, or the government backup (Social Security) and get government medical benefits so that getting sick once didn't wipe you out financially (Medicare).
However, medical technology, good dentistry, and the "health craze" movement have all added years on to people's lives. Now people live longer, and expect to partake in the government largesse. People who live longer need expensive medications and surgeries to help them live longer. The longer they live, the more Social Security and Medicare money they soak up.
Just look at President Clinton or VP Dick Cheney. Both men would be dead (or unable to do much more than lay in bed) without nifty cardiac surgeries. Those surgeries cost thousands and thousands of dollars. (I am not saying that the price of these procedures is too much, just that they cost lots of money.) Now that their lives have been prolonged, they can expect to continue taking medicines to keep their cholesterol down, blood pressure down, and so on for the rest of their lives. This costs more money. When they finally make it to the age where cancer starts to take them down, they can expect to use more money on cancer treatment.
The longer you live, the more it costs to keep you alive. Multiply that by all the people eligible for Medicare, and you can see how the policy of providing medical treatment to people is a positive feedback loop that rapidly chews up all your spare money.
How do we solve this problem? Heck if I know. I don't want to turn us into some parody of Logan's Run where people are forcibly retired from living at age n. But I do want those who run for political office and who claim "leadership" as one of their defining adjectives, to discuss this seriously.
if you're going to buy 80 kilos of uncut peruvian cocaine what are you going to pay with? drachmas?
Drachmas? As if, Greece uses the Euro now.
as a general rule: if it's against the law, it's paid for in greenbacks.
Queue the american national anthem. You must be so proud!
the greenback will stay the strongest currency
You make the assumption that it is the strongest currency, which clearly it is not.
Also, this outstanding debt means, that the greenabcks in your pocket, are not actually yours, but belong to someone else who has been promised to be paid back, and if this breaks down, then noone will want them.
If the price of your cocaine sky rockets (in $$$), I wouldn't be suprised.
#hostfile 0.0.0.0 primidi.com 0.0.0.0 www.primidi.com 0.0.0.0 radio.weblogs.com
Hi,
> Good idea, but why not go all the way and just allow voting on the issues directly?
That, alas, goes entirely against the idea of a Republic, and also leads to 'tyranny of the masses'.
The idea behind the US gov't is that gov't is too complicated for each us to constantly stay informed of and be able to fully judge each issue.
So, instead of requiring every citizen to be fully and accurately informed every day on 200+page bills, we instead use representatives. "I don't know gov't, but I trust that Joe's views are close to mine, and that he'll represent me accurately."
Contrast this to a pure democracy-- say, at the neighborhood level. If the issue is raised to 'evict Mawbid due to fashion sense' and 51% agree, you're screwed. That's tyranny of the masses (corrolary: a good society is one where it is safe to be unpopular.)
In a representative system, though, 51% might vote for Fred, who runs on a Pro-Eviction platform, but Fred will (hopefully) look and say, hey, we don't really have a mandate here, and Mawbid's fashion errors aren't enough to do this.
In short, the republic adds friction and a buffer between the populace and laws. Both are good-- we don't want gov't making instant laws or automatically going with slight majorities.
So voting directly on issues, nope. Voting more accurately for candidates and removing the marketing/advertising of career politicians, that I'm for!
A.
So we raise the min wage to $50/hr. What will this do. I currently make$35/hr so I need a raise to $75/hr because I do not have a basic job. The people that have more responsibilities than me get a raise to $100/hr. So now that means that everything that we produce must cost more to cover our wages as I work in a small business and there is no big corporate money. Our product that was selling for $150 must now sell for $225. Are you as a consumer willing to pay that increase or is my company going out of business?
Hmm, so we can increase the tax base by raising the minimum wage. Alright, let's raise it to $100 per hour! That should help the economy LOTS, right?
No? What do you mean, it would cause inflation if we raised the minimum wage? Surely that wouldn't have an effect on Social Security, just because it is indexed to inflation?
HINT: we cannot legislate prosperity. If raising Minimum Wage were all that were required to fix all economic problems, we would have done it long ago.
#2. For the cost of the medicare system, we can publicize the whole thing and bring out Universal Health Care. Again overal this would create more a more efficent system, which basic economics says creates more jobs, meaning a higher tax base. As well, it would have a nice side-effect of fighting overseas job loss, as rising health care costs are a big motivator to move the jobs in the first place. Cut the parasites out.
It's possible that nationalizing healthcare would lower costs. It's possible it would raise costs. What is certain is that if you replace Insurance Company bean-counters with Government bean-counters, it won't produce improved healthcare. Or do you believe that the Government bean-counters have your best interests at heart, as opposed to say, their own?
#3. Make it official government policy to have as many people to work as possible. Current government policy is to maintain a certain unemployment rate to fight inflation. Get the people you need to do whatever jobs needed to be done. Sure it costs tax dollars. But with all the spinoff money of those jobs, the amount of taxes taken in will much more than account for the additional costs.
Assuming we add all unemployed to the workforce today, that increases tax revenues by ~7% (if the unemployed all get jobs at the "average" income). Which isn't enough to make much dent in the CURRENT deficit, much less the deficit envisioned when the babyboom generation leaves the workforce.
Yeah the corporations will bitch and scream. But it's pure survival folks. It's them or us.
Interesting point of view. I take it you are self-employed? Because if you work for a corporation (I do, a small one, but incorporated it is), you might want to keep in mind that by raising costs for your employer to keep you employed, he might just decide he can't afford to pay you anymore.
We exist in a symbiotic relation with "the corporations" (or "the rich") - if they fail to prosper, we will also fail to prosper. It's not US vs. THEM, it's us AND them....
"I do not agree with what you say, but I will defend to the death your right to say it"
Overall, the big problem I see with the economy, what entitles "success", and the expectation there-of. Basically, increasing profits as far as the eye can see, which frankly, has its limits.
#1. I would suggest using a region based minimum wage based on some sort of scientific formula. Basically, add together all basic costs and add 10% or so for discretionary spending/saving and tie that in to a 140 hr/month work.
Do that for individual areas, and it would make sure that people see the value of hard work and labour.
#2. What you say is very true, which is why to make it happen it has to be done right. Generally speaking, in what's paid out in Medicare alone, on a per person basis, could pay for UHC for the whole country, with quite a bit of savings. That's the numbers and how they work out.
#3. Actually it creates quite a bit more than 7%. Money doesn't get spent once and disappears. It keeps on spinning around, creating more demand for services, creating more demand for labour.
In any case, it's more of a re-calibration of the economy than anything else into a service based economy. Eventually there will be enough money/jobs flowing around that government intervention will be minimal.
I don't have anything against corporations. What I do have something against is the assumption that profits are infinate. As well, short-term thinking is the rule of the day, which is good for CEOs and their bonus checks, not so good for the average investor, worker, or citizen.
Good idea. I want to be competing with 70 yr olds who have 45 years of experience. Young people have enough trouble finding decent jobs. Thanks Mr. AARP.
Its not just social security either: Many economists now believe that the effect of baby boomers retiring will send shockwaves through every industry.
Healthcare will not escape unscathed, as demand for limited and expensive drugs goes through the roof. The pressure to legislate away the basic economic problems of supply/demand will be near overwhelming -- and either big-pharm will become increasingly socialized, or radical restructuring of medical financing will be required.
Housing and Real-Estate *will* crash as sure as night follows day when retiring baby-boomers, needing extra cash downsize into retirement communities. (Remember that almost 90% of high-end real estate is owned by boomers). The notion that real estate always goes up (while true in the long term) will be challenged by a 20 year downtrend as baby boomers' real estate assets inundate the market in an unprecedented deluge.
And the list of impacts goes on and on... inheritance law, banking, education... everything is going to be affected by this -- the largest of population trends in the next 20 years.
What's really scary are the downstream effects -- like what happens to Freddie and Fannie when the great boomer real-estate liquidation happens... but that's O.T.
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