Posted on 08/25/2009 2:10:02 AM PDT by Yosemitest
If there wasn't any loss in process, that would be true, but there is. As you have said, the money just keeps recirculating, but there is some loss to waste, fraud, and bureaucratic/administrative overhead, and that loss accumulates with every cycle.
Is there an efficiency loss *compared to the wealth we'd otherwise enjoy* from shifting resources from where the market would put them, to where our votes decide to put them? Sure. But it isn't a spending to zero of our existing wealth, it is merely an opportunity cost of additional gains in that wealth, foregone.
No spin can make us poor. Look around you, every useful convenience you see and all the services it produces is own and owned exactly once and owned free and clear. Everything else nets out to zero. No verbal sleight of hand can make those buildings and businesses disappear. It's hopeless, we are not poor and we aren't going to be poor. Men in the Congo are poor, you can see it in the wastes surrounding them and the squalor in which they must live. We are not.
And you never said what time frame.
The unfunded liabilities seem to be mostly in Medicare and Social Security, so the time frame looks to be around 30 years.
The demographics of the situation are that the bulk of it will be sooner, rather than later. The baby boom generation is starting to retire. All the money they put into SS that was supposed to pay their benefits has already been spent on other things, and there isn't enough money coming in to cover the projected expenses. How can that not translate into debt?
Normally, when they talk about those shortfalls, they're talking a 75 year time frame.
The figures I've seen for the unfunded liabilities of the federal government are at 59T. That's more that the net assest of the US households
That is similar to noticing your mortgage is larger than your net worth while ignoring your income over the next 30 years.
The premise seems to be that for every dollar that gets sent to the federal government in taxes for entitlement programs, another American will always get a dollar back. The only loss is the loss of any return that might have been had from investing it. Bureaucratic/administrative overhead, waste and fraud are assumed to be 0.
If the government borrows to pay those benefits, that definitely translates into debt. Until then, it's not.
Congress could cut Social Security in half and suddenly the unfunded liability would drop to zero (or whatever) so it is clearly not the same as debt.
Due when?
Not due now, due over what period of time?
Let's say it's 30 years, at $13T GDP, that's $59T of unfunded liabilities to be paid by taxing $390T in GDP.
Love your tagline.
The demographics aren't being taken into account though. Looking at that over a 75 year time frame doesn't seem to present an accurate picture of the situation if 75% of the liability has to be paid out in the first 25 years.
When they say "unfunded", I'm assuming they're looking at projected outlays compared to projected receipts. The taxes have already been taken into account. Is that not the case?
I don’t know, but I presume the answer is yes.
If they can arbitrarily do that, then calling it a "liability" doesn't seem line up with the way the term is normally used.
Then that's 59T of unfunded liabilities to be paid by taxing $390T in GDP, on top of what we're already paying.
The 75 year time frame takes into account everything.
Of course.
But it’s not $59T due now, or even this year.
Of course it's not. But it still represents an average 15% loss of take-home pay to wage earners for the next 75 years, assuming the GDP and the size of the workforce remains stable. If we're on the cusp of an extended period of recession, and if additional factors like Cap and Trade reduce our production, and unemployment stays up, then that's going to exacerbate the situation for the remaining wage earners.
If GDP and the size of the workforce drops, that's going to require an increased percentage of GDP siphoned off in taxes to meet those liabilities.
No one works for 75 years. For some portion of those years, you are collecting those benefits.
So all the fraud, waste, and bureaucratic overhead is still "someone receiving that dollar", even if it didn't go to any intended recipient?
There is such a thing as a fully funded pension plan. In such a plan, the earnings on capital of the sums originally deposited pays for all of the claims made against the plan. The unfunded liability calculation is the capital sum that would suffice to move to a fully funded pension plan, with no reduction in benefits as promised today. (Which is a promise of great whopping increases per person as far as the eye can see, by the way, not a promise to maintain existing levels of spending, even per capita).
Fully funded pensions are preferable from an economic point of view, because men first save to accumulate the capital involved, and they enjoy all of the real benefits to productivity that real capital supplies. Saying that a fully funded plan is preferable is equivalent to saying "savings are good", and that we'd be better off with more of them. This is correct as a principle, and gradually and affordably transitioning from the present unfunded system to a fully funded one, is a good idea.
Which is not remotely the same as saying no one owns any wealth because they owe all of it to a nameless money-pit in the sky.
The present value of future benefits calculation is for the amounts actually received.
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