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.

Way to go, asshat

[Safety Cap]

Please allow me to highlight the most important part of the article you forgot to include:

Copyright [economist.com] © The Economist Newspaper Limited 2004. All rights reserved.

As you are obviously incapable of understanding rudimentary concepts like copyrights, then I will not explain them to you. Perhaps someone else reading this who might be confused by your flagrant violation of the law will first check out common copyright myths [templetons.com] before deciding to emulate you.

Re:Bush mentions SS on his web site, Kerry doesn't

[pb]

It's under medicare [johnkerry.com], go figure.

Re:Read my post again please :-)

[Canthros]

No, a baby boomer, at least in the context of the Social Security problem, was a child born during the baby boom of 1945-65. The group you refer to as their parents is either the Silent Generation or the G. I. Generation (aka the Greatest Generation, and a handful of other names, reflecting their involvement in fighting WWII).

Run "baby boomer definition" through Google and see what you get. I'd be curious to know which web dictionary you got you're definition from; it's not correct.

Re:Enron showed how delusional Bush plan is

[leftie]

Work while you are healthy and productive.

Yeah... that's the way Social Security was designed.

When Social Security was started, it was not a retirement plan. It was a safety net to protect those who aren't capable of earning a reasonable living. People are so much healthier now so much later in life that it's reasonable that those who are in good health continue to work later in life.

However, that's also why, in exchange for increasing the retirement age, you expedite the process through which those who aren't healthy enough to work can be started up on disability much more quickly and easily.

Re:There is another choice

[joss]

Why gold and silver, why not butterflies.

What is inherently more real about using gold and silver as a basis for currency than some other arbitrary good ?

If someone creates something, eg writes a computer program, there is more stuff in the world, and either more money needs to be created, prices need to go down, or we end up with a situation where there is plenty of stuff around, but not enough money for people to buy it. Stuff gets created all the time, so the amount of money available has to go up continually. Since we have fractional reserve banking system money is continually created [in form of debt]. In fact, so much is created that we end up with inflation rather than deflation.

I agree that the current debt based monetary system is responsible for a huge number of problems, but it works better than the gold standard did. It's not just that it works better, economies which relied on stagnant money supplies got wiped out in an almost darwinian fashion. Debt based money fosters growth [and inflation, boom/bust economics, banking supremacy, war and other stuff, but it's certainly less stagnant].

I recommend "The grip of death" for a better understanding of this stuff.

Re:Bush and the deficit

[jamie]

It is indeed Bush's fault. About half of the deficits are the result of Bush's tax cuts [pkarchive.org]:

The prime cause of giant budget deficits is a plunge in the federal government's tax take, which fell from 20.9 percent of G.D.P. in fiscal 2000 to a projected 15.7 percent this year, the lowest share since 1950. About 45 percent of this plunge can be attributed to the Bush tax cuts. The rest reflects the end of the stock market bubble, the still-depressed economy and -- probably -- growing tax sheltering and evasion.

(Note: much of the reason the economy is taking so long to recover is, obviously, the war in Iraq, and the fact that Bush's tax cuts were back-loaded, having most of their effect in the years to come, not in the three years we just lived through.)

And you simply have no idea what you're talking about re "massively increased spending." Go look up what the annual increases in discretionary spending [factcheck.org] were under Clinton and under Bush. Even Cato calls it "The Republican Spending Explosion."

Re:Social Security, etc...

[ConceptJunkie]

and far more is needed to prevent a crisis.

It's another big piece of the national debt that doesn't get counted in that $7 trillion total. The frustrating part is that if we poor schmucks engaged in this kind of accounting, we'd end up bankrupt or in jail.

Re:Enron showed how delusional Bush plan is

[leftie]

What you are saying is that you want a program that is twice the size of social security and twice the cost of social securuty that provides half the benefits.

Every single private industry insurance program that has ever been concieved has required government bailout to pay off what the private industry insurance program was supposed to pay out and did not. FDIC and FSLIC completely failed in the saving and loan scandal of the 1980's. The US government provided 99.99% of the payouts to customers of those failed banks and savings and loans.

Therefore, the only way you could ensure a private industry safety net investment program would not fail would be through regulation. You clearly don't understand what kind of government regulatory monstrosity you would have to build to monitor people's investment transactions to ensure the goal of providing a safety net.

What you don't understand is that in dealing with programs of massive scale for society, it make far more sense and costs much less to allow govenment to provide the services.

Lets put this in Perspective... really

[Anamanaman]

Think about the debt in the same way you think about a mortgage.

Say you buy $1,000,000 house with a loan. Your salary is $50,000. You are in trouble.

Say you buy a $1,000,000 house with a loan. Your salary is $200,000. This is perfectly acceptable.

The point is, just looking at the debt amount is meaningless. You also have to see what the income is to see if you are in debt trouble.

Let's put this in the perspective of the national debt. The debt seems pretty large. However you need to look at the income. What is income? It's national GDP (gross domestic product). As our GDP goes up, so does our ability to sustain a larger debt.

This is the one thing the deficit demagogues never mention. Our GDP has gone up dramatically over the last 20 years. So when looking at a national debt, first you need to adjust for inflation. Then you need to take the proportion of the debt compared to the gdp. Do this with our current national debt, you will realize that our debt is very manageable and much less than it was during Reagan and FDR.

Here's a good graph of Debt vs GDP:
http://zfacts.com/p/318.html

So yeah, the debt is too high right now. No one disputes that. But its not the end of the world. The economy isnt going to collapse, even if our debt was double what it is now.

Re:Not ignored

[dcmeserve]

He broke every promise from Last election, too. He promised to cut government spending, but has vastly accelerated it, even before 9/11. He promised to reform education and got the Dems to go along with NCLB, but then refused to fund it. He promised to bring credibility to the White House, but instead transplanted Clinton's personal life into dishonest economics (like unemployment staying constant while the overall number of jobs drops, or lying about the cost of Medicare prescription drugs) and dishonest foreign intelligence. He denounced nation building (in Kosovo), but launched a war with no other purpose than destroying a nation so we could rebuild it to suit our purposes.

Credibility, education, and the size of government, restraint in military adventurism. Those were probably the biggest themes of his "compassionate conservative" campaign--and he has delivered on not a single one of them.

Bush never promised you personally would be satisfied. The fact that you're not has little bearing on whether he kept his campaign promises.

Your lack of thought now shows through. In your mind, you are twisting what he said into a statement of his own "satisfaction", rather than the objective facts he is actually laying out.

Or do you mean that you yourself are personally satisfied with broken campaign promises, and that somehow means that the promises were actually kept?

Either way, there are some serious flaws in your thinking. Pretty typical.

Re:They're just as bad as the CBO

[Anonymous Coward]

Just to clarify your point, the idea that SS will go broke in 2039/2047/whenever is based on the idea that the Federal Treasury will have real $$ in the SS trust fund and not the IOU paper-slips the Fed. Govt. has been putting in the SS trust fund cooffers. Regardles of however solvent SS is in the long run, the real problem is that the Fed. Govt. may not be solvent by then.

This is going to start biting us starting in 2010. At that time, SS will start taking in less than what it is paying out. The Fed. Govt., instead of having the luxury of taking out real $$ from the SS trust fund (and putting in IOUs), will face the prospect of having to put in $$ to cover the SS payouts.

Pity the head honcho who will wear the crown in 2008.

Bush is a flip-flopper

[lorcha]

The solution is very simple: cut spending, grow the economy, reform Social Security into private accounts. Bush is saying he'll do all those.

In term 1, he ballooned spending, shrank the economy, and expanded Social Security welfare.

The biggest problem with Bush is he is not a conservative! Why the hell do Republicans like him so?

Actual land ownership

[Bowling Moses]

I was curious about your claim about US Gov't land ownership so I did a little looking and found this site [nwi.org] that tallies government land ownership, took that data and ran it through a spreadsheet. Not including Alaska and Hawaii, state and federal government ownership accounts for 34% of the land in states west of the Mississippi (including those states stradling the river). Including AK and HI the total goes up to 47%.

The next question though is how much of this land is actually worth anything, since the states with the highest proportion of government land (Alaska, Nevada, Utah, Idaho, and Oregon are the top five by percent) tend to have the largest percentages of land that is worthless or nearly so. There's a whole lot of mountains, desert and arid plains in the west, and in Alaska there's less of the desert, but they make up for that with tundra and boreal forests. Sure there's some valuable resource-rich land out here, but extractive industries won't buy public lands that they already have rights to take resources out of. These two factors alone will likely make the total saleable goverment land plummet to a small fraction of the total government holdings. Some desireable lands will remain, but some portion will be in state and national parks and outside of the Libertarian party you'll find scant public support for selling those, dropping the saleable number even further.