Posted on 03/08/2004 12:13:50 PM PST by Dog Gone
WASHINGTON -- When Alan Greenspan urged Congress recently to cut future benefits in Social Security and Medicare, sending elected officials to the barricades, he was, if anything, understating the magnitude of the problems ahead.
Today's budget deficits are measured in the hundreds of billions of dollars, but the looming shortfalls for the two retirement programs are projected to be in the tens of trillions of dollars.
The Bush administration has estimated the gap between promises under current law and the revenues expected will total $18 trillion over the next 75 years. But an internal study in 2002 by the Treasury Department, looking much further ahead, concluded that the gap was actually $44 trillion and would climb each year that nothing was done.
The numbers are so big and extend so far into the future that they border on the surreal. Yet analysts in Congress and the administration warn that the flood of retiring baby boomers will cause federal spending on old-age benefits to eventually consume as much of the nation's economy as the entire federal budget does now.
And while the problems would be acute even if today's federal budget were balanced, the budget deficits that seem likely for the rest of the decade make matters worse. That is because the government is borrowing more than $200 billion a year from the Social Security and Medicare trust funds to finance its operating deficits.
In theory, the two giant trust funds are accumulating huge surpluses that can be used to pay for benefits when the baby boomers retire and the systems start taking in less than they are paying out. In practice, those surpluses are being spent, and the government will probably have to borrow huge sums to meet its obligations to retirees.
"It is time to start telling people the truth," said Laurence Kotlikoff, a professor of economics at Boston University and a longtime analyst of the issue. "Suggesting that some minor adjustments to Social Security will solve the problem is doing a disservice."
As precarious and uncertain as long-range forecasts are, most experts agree that the combined challenges of Social Security and Medicare are too big to be addressed without politically painful remedies.
The number of retirees is expected to soar from about 40 million today to more than 76 million by 2030, meaning that fewer dollars will be coming in from payroll taxes and many more dollars will be going out in retirement and medical benefits.
The oldest baby boomers turn 65 in 2011, and by one estimate a husband and wife who retire that year are likely to collect $700,000 in benefits before they die.
Trustees of the Medicare and Social Security funds predict that the two programs will run surpluses of more than $200 billion a year for at least the next decade. But the Medicare trust fund would start running deficits in 2013 and run out of money by 2026. Starting in 2018, the Social Security System will start paying out more than it takes in and, therefore, will have to dip into its trust fund. By 2044, the trust fund will be exhausted.
Most experts say the problems of Social Security are much smaller and more predictable than those of Medicare because retirement formulas are fairly simple, and the cost of benefits depends primarily on demographic trends that are quite predictable.
Medicare's condition is more ominous because medical costs have been rising much faster than the overall rate of inflation, and the demand for health care is expected to soar as the baby boomers retire.
The Bush administration estimated last year that Medicare's obligations would be more than $10 trillion over the next 75 years. But that was before Bush signed the law that will add prescription drug benefits to Medicare, which the administration now predicts will cost $540 billion over the next 10 years. The costs will climb rapidly after that, as the number of elderly people soars. The Congressional Budget Office has predicted that the new program could cost as much as $2 trillion in its second decade.
Bush and many administration officials contend that much of Social Security's problems could be solved by letting people divert some of their payroll contributions to private investment accounts they might manage for themselves.
But experts say the government would have to borrow as much as $1 trillion over the next several decades to make up for the lost revenues and pay retirees benefits earned under the old system.
And the Congressional Budget Office, in a report on privatization plans last year, said none of the proposals would have much effect.
Kotlikoff of Boston University has devised a "menu of pain" to lay out different ways of bridging the gap. The choices range from an immediate increase in federal income taxes of 69 percent to an immediate cut in Social Security and Medicare benefits of 45 percent.
And those numbers may be too low, he said, because even the disavowed Treasury estimate for the shortfall may be too low. When the new prescription drug program is added, he said, the imbalance is closer to $51 trillion.
Whether one accepts the administration's forecast or that of the disavowed study, everyone agrees that the potential problems with Social Security and Medicare dwarf the short-term problems of balancing the budget.
"The issue is entitlements," said Gregory Mankiw, chairman of the White House Council of Economic Advisers. "That is a huge challenge, but it would be a challenge even if we had a balanced budget today."
Rich is defined as, "someone who votes Republican."
What did ya think, boomers? You were gonna live forever?
If America had not aborted 40,000,000 of it's future taxpayers thru our abortion laws, there would be no Social Security problem today.
Roosesvelt just never counted on we the people being so stupid as to not figure that one out even if his new deal was certainly flawed.
Seventyfive year forcasts?
With some exceptions, they must pay into the system for 20 years in order to draw on it.
40,000,000 immigrants just patches the actuarial hole that 40,000,000 aborted people who would have been paying into the system at precisely the period it begins to become insolvent.
Then how do you propose to keep sending the checks?
Then they set about doing everything possible to ensure a declining population.
Reminds me of Cary Grant's line in Operation Petticoat: "Maybe I am giving in to hysterics, but could it be possible that Lt. Crandall is a Japanese agent?"
I just don't see Social Security being there for me when I retire. There's no way to fund it.
If we could get about 1/3rd of the Baby Boomers to decline Social Security entirely, there might be a chance, but who's going to volunteer to do that?
And don't get me started on Medicare. We could spend more on a retired person's healthcare than he or she made in wages in their entire lifetime.
How do you fund that?
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