US Candidates Ignore Looming Debt Crisis 266
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.
Social Security, etc... (Score:3, Insightful)
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.
Re:Social Security, etc... (Score:5, Insightful)
You're right. But at this point, I'd rather take the investment risk than the certainty of a cashflow system that will fail. The second reason you describe obviates the first... one of the reasons, besides basic mathemetics, is that the so-called Social Security Fund is really just more government debt.
From what I've heard, in the best of time Social Security ended up rendering about 2% interest in terms of average payouts. There is no 40-year period in the last 100 years where investments in the stock market wouldn't have beat that by a huge margin. The key is the length of time: 40 years. Certain the period from 1928 to 193x was awful, as were other times like 1987, 1990-1991, and the beginning of this decade, but over 40 years, these drops were more than offset by the subsequent economic growth.
If the government could unleash the economy with true tax reform (a la Dennis Hastert, Jerry Brown and many others), combined with a program of retirement investment becoming personal rather than just another Congressional feedbag and Ponzi scheme, I think the problem can be solved. However, these are drastic measures, and it seems like it would take someone as crazy as Ross Perot to be bold enough to actually propose them (rather than just hint around). That's one thing I really respected about him, by the way. I was really hoping President Bush would drop a huge tax reform bomb at the RNC convention, and I think it could have clinched his run for re-election. Like a friend of mine used to say: The flat tax (or whatever scheme you are talking about, like VAT, etc) won't work perfectly either, but it makes a whole lot of sense to start from there and fix that rather than add to the 20,000 pages of tax code that alreadyt exist. An additional plus is that there's a whole industry of people who could get jobs that actually produce something rather than just waste productivity dealing with an incomprehensible tax code.
True tax reform and Social Security are just like the weather, everyone talks about them but no one does anything.
Bush and the deficit (Score:5, Insightful)
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 [cia.gov] of wealth every year, and, through our government, we are $7.4 trillion [brillig.com] 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 [thenation.com] 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.
Not ignored (Score:3, Insightful)
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.
Reality Check (Score:4, Insightful)
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.
Re:Social Security, etc... (Score:5, Insightful)
Social Security is not a personal retirement account.
It is a social safety net; It is a social pact, a new socal covenant; It is the promise of the Government that when you get old, you will not be homeless and die of hunger. It is not about rich people having more disposable income when they retire. The Rich are not supposed to get the lions share. If you think of Social Security as a safety net then, who gets paid, becomes clear. The people who paid the least get the most, and the people who paid the most get the least. This is the heart of the "New Deal" the new pact between the Government and the People.
This is a program that, at its heart, is truly Christian (not to say that it doesn't fall well into any other religion, Christian is just what I was raised). This is loving your neighbor. This is helping the poor.
The Candates get away with ignoring it .. (Score:3, Insightful)
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
Enron showed how delusional Bush plan is (Score:4, Insightful)
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.
Re:Way to go, asshat (Score:1, Insightful)
Class Warfare already declared by investor class (Score:2, Insightful)
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.
I say none of them. (Score:4, Insightful)
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.
Re:Enron showed how delusional Bush plan is (Score:4, Insightful)
Likewise, you aren't offering any suggestions about what to do when Social Security collapses under its own weight in the near future...
Some more suggestions to save tax $ (Score:2, Insightful)
-Pull out of Iraq. Now.
-End military aid to ALL foreign coutries
-Stop development of Star Wars defense system and new nuclear devices.
Re:Lots of small changes (Score:5, Insightful)
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.
Re:You can protect your money (Score:4, Insightful)
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.
Re:Issues or candidates (Score:4, Insightful)
> 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!
Re:Social Security, etc... (Score:5, Insightful)
But that's what it's been sold as, at least these days. Otherwise it's just another tax and more income redistribution. If they call it that, then I think people will look at it a lot differently, especially since there will be no difference between the hard-working person who couldn't save enough to retire despite good planning and best efforts and the stupid person who didn't plan for the future and squandered his money, from the system's point of view. And we all know proving a negative ("I can't be successful.") is infinitely harder than proving a positive ("I have been successful."), where success here means being able to take care of yourself.
I'm not disagreeing with your categorization of what it should be. The problem with all these "Christian charity" type Government programs is a.) they are coerced, and b.) that far too many people will do everything they can to unfairly take advantage of them.
I'm not saying there shouldn't be a safety net, there absolutely should be. But I am extremely leary when the government implements one, because every time it has done it in the past, it has failed. Not in the fact that it didn't provide the safety net, although that happens, but the fact that such programs attract abuse and result in dependency, whether real or perceived.
It is truly Christian to administer "tough love" (although obviously not to the point of people starving to death). The problem is that there are people who cannot help themselves, temporarily or permanently, and people who will not help themselves, because of lack of education, motivation or need (i.e., the system lets them float along just fine). I think the former, while very real and in genuine need of our help as citizens and as a society, are greatly outnumbered by the latter. The problem is that "The Government provides a safety net." is perceived by many as "The Government owes me a living."
The pact of the New Deal is that if you do your part, the government will cover your butt if something really bad happens, and that's good. The problem is with the "you do part" part of it. Just like with Communism, the "give what you have and take what you need" won't work when people fail to acknowledge the proper definitions of "have" and "need".
Re:The situation is not totally helpless however.. (Score:4, Insightful)
Re:Social Security, etc... (Score:4, Insightful)
As it is now, even the richest old people get their social security check each month.
What you're describing is welfare.
Re:Social Security, etc... (Score:5, Insightful)
Your right about the safety net functions, but this is a recognition of a more advanced and complex society and the rights that must be recognized in order to achieve growth in this modern world. I believe that is a more accurate description of the heart of the New Deal. No law in the US, no matter how "good" or "moral", can use morality as it's basis for authority and remain valid. Laws who's only basis of authority is moral violate the principle of equal protection under the law.
The GOP economic policy of so-called ownership is about taking ownership of risk, not providing opportunity. If you look at all of their proposals and replace the word opportunity with risk they start to match with reality instead of looking like some ideologue's fantasy. Check out this column [washingtonpost.com] by Harold Meyerson, which lays out this concept very clearly.
Re:The situation is not totally helpless however.. (Score:3, Insightful)
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....
Re:Social Security, etc... (Score:1, Insightful)
Haven't you heard of the Iron law of Distribution of wealth: Them who have more, get more.
SS is a scam of the government, by the congress and benefits the politicians like Halliburton.
Unless we learn to take care of our parents in their old age rather than letting them die in the streets, we will continue to be bankrupt.
Countries like India, Malaysia don't have Social security. Yet their old do not die like dogs on streets. The younger children take care of the old. That's the social custom. Only in western society we have thos concept of throwing out our grandparents and parents once they retire.
We pay the price for changing customs enshrined for thousands of years.
Why do you think the ancients (Greeks, Romans, Indians, etc) advised the young to take care of the old?
Responses: (Score:3, Insightful)
#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.
Re:Not exactly being ignored (Score:3, Insightful)
These are the seeds of a far greater crash... (Score:4, Insightful)
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.
Re:Social Security, etc... (Score:5, Insightful)
Walter Williams said it best [gmu.edu]:
Re:Social Security, etc... (Score:1, Insightful)
"You're".
Re:Bush and the deficit (Score:1, Insightful)
there is a saying in politics, basically the current president rides out what the previous president set up. (economy wise)
the way bush gets blamed for everything, it makes you wonder if it is just rabid antibush rhetoric, or if people actually beleive he is behind everything as a huge conspiracy (of course he is also called stupid)
so if kerry gets his one term, he is going to be the sole blame for everything wrong in life.
Re:Social Security, etc... (Score:5, Insightful)
Re:Social Security, etc... (Score:3, Insightful)
What an idiotic statement this guy's making. He's neglecting the fundamental facet of "government" - governments exist to provide order. We gain order by sacrificing some of our freedoms. Democracy guarantees that the freedoms we give up are the freedoms that the majority want to give up, and the order that we gain is the order that the majority want. The government cannot be immoral if the people are free to choose the order to gain the freedoms. In other words, it's only immoral if they can't leave the country.
No one is forcing people to remain in the US. They can leave, and stop paying Social Security if they want to. The point is that the majority of the people have decided "if you want to live with us, you must agree to pay into Social Security if you work."
To call this stealing is moronic. By that logic, all taxation is stealing, and is sinful. How is social security any different than a publicly funded fire department? Most people never see the benefits of a fire department. Shouldn't the people whose houses burn down have to pay the fire department for their services, and then, if everyone else in the community wants to, they can help and give donations to those people? Can't I make the same argument for the police as well?
Laws that don't force actions upon people can't be sinful, because you can always choose to not do said actions. And you're not forced to pay into Social Security. You can still leave the country. But that's the price of living in the US with the rest of us.
It can't be stealing if you agreed to it. And since you can leave, you did agree.
Re:Social Security, etc... (Score:3, Insightful)
As for being a scam, yes there's a problem that the system can only pay for itself if there are more working people than people collecting benefits. However, these previous generations payed for your education, built the roads you use, the sewer systems, etc, etc, etc. Go watch The Life of Brian again where everyone is complaining about the Romans, you'll get the picture.
I can't say I entirely disagree with your position on the boomers, but I do disagree with your example. Your anger is misdirected. Social Security and other programs are not your problem. Your tax bill is not the problem. Your idea is to redivide the pie of your paycheck, you should be worried about how to grow your paycheck. Average incomes have been falling since a peek in the early 70's before either of us were born. You'd be making $6000 more a year in real dollars in 1970 with your current salary. Life is much more competitive for us than our parents. You can blame the previous two generations' culture wars for a lot of this.
What your experiencing is a lack of oppurtunity for growth. The concentration of wealth that occured while everyone was worried that drug using, free loving hippies were going to destroy the world, along with the commies, has put you and the rest of us in the middle class at a competitive disadvantage. The Founding Fathers warned us of this. The Federalists claimed that factionalism among equals would sustain the balance of power. Noah Webster, writing in support of the Federalists, stated that power was actually wealth. If you look at the history of our country, through the 19th century we gave everyone who wanted to move West a family farm. Once the industrial revolution hit, there wasn't as much good farm land left, and family farming wasn't a great way to get ahead. With a growing population, most people wound up working in factories, regulations were required to ensure these people weren't exploited to the point where society was damaged. That's how we wound up with Unions, labor law, 40 hour weeks and Social Security. The first half of the 20th century had a large number of victories which helped to create the prosperity (along with wartime spending, GI Bill) that the boomers have been using up.
Our modern society requires that we have stable foundations to grow, new industries like utilities create that foundation. Innovation won't happen when the only place to build the future is shifting sands. Social safety nets also create that foundation. You can take risks if you have a safety net. If your in the middle class, that safety net can mean the difference between poverty and bouncing back from a risk that goes bad. These anti-government, anti-regulation fools are handing the keys to the kingdom to the hands of our future masters. Concentration of wealth is the greatest threat the our country.
If you want to solve this problem, learn law. I don't mean learn how to sue people, I mean an academic understanding of the ideals of law and it's history. It's just as scientific a field as programming. When you understand this and can apply it to the world around you, you will be able to identify your challenges and your enemies. This country has forgotten it's history and have attached to some mythological idea born of anti-intellectualism. Embrace that history and remember that it is your right, no one grants it to you because the Constitution guarantees it to you, if no one will honor this right then you must take it. If this society or system will not provide it, then it no longer has just authority over you. You are not the one failing to live up to the deal, they are.
As for immediate action, stay calm, vote every chance you get (vote Democrat right now, after the election, different story), study law and le