Skip to comments.The Coming Entitlement Meltdown[Ron Paul]
Posted on 03/08/2007 7:28:59 PM PST by FLOutdoorsman
David Walker, Comptroller General at the Government Accountability Office, appeared on the show 60 Minutes last evening to discuss the federal budget outlook. If you saw the show, you know that he painted a very sobering picture regarding the federal governments ability to meet its future obligations.
If you didnt see the show, Mr. Walkers theme was simple: government entitlement spending is like a runaway freight train headed straight at American taxpayers. He singled out the Medicare prescription drug bill, passed by Congress at the end of 2003, as probably the most fiscally irresponsible piece of legislation since the 1960s.
When it comes to Social Security and Medicare, the federal government simply wont be able to keep its promises in the future. That is the reality every American should get used to, despite the grand promises of Washington reformers. Our entitlement system cant be reformed- its too late. And the Medicare prescription drug bill is the final nail in the coffin.
The financial impact of the drug bill cannot be overstated. Government projections that the program would cost $400 billion over the next decade were a joke, as everyone in Congress knew even as they voted for the bill. The real cost will be at least $1 trillion in the first decade alone, and much more in following decades as the American population grows older.
The Medicare trust fund is already badly in the red, and the only solution will be a dramatic increase in payroll taxes for younger workers. The National Taxpayers Union reports that Medicare will consume nearly 40% of the nations GDP after several decades because of the new drug benefit. Thats not 40% of federal revenues, or 40% of federal spending, but rather 40 % of the nations entire private sector output!
The politicians who get reelected by passing such incredibly shortsighted legislation will never have to answer to future generations saddled with huge federal deficits. Those generations are the real victims, as they cannot object to the debts being incurred today in their names.
The official national debt figure, now approaching $9 trillion, reflects only what the federal government owes in current debts on money already borrowed. It does not reflect what the federal government has promised to pay millions of Americans in entitlement benefits down the road. Those future obligations put our real debt figure at roughly fifty trillion dollars- a staggering sum that is about as large as the total household net worth of the entire United States. Your share of this fifty trillion amounts to about $175,000.
Dont believe for a second that we can grow our way out of the problem through a prosperous economy that yields higher future tax revenues. If present trends continue, by 2040 the entire federal budget will be consumed by Social Security and Medicare alone. The only options for balancing the budget would be cutting total federal spending by about 60%, or doubling federal taxes. To close the long-term entitlement gap, the U.S. economy would have to grow by double digits every year for the next 75 years.
The answer to these critical financial realities is simple, but not easy: We must rethink the very role of government in our society. Anything less, any tinkering or reform, wont cut it. A good start would be for Congress to repeal the Medicare prescription drug bill.
Yes, it might be economically more sensible, and is probably worth exploring.
Had I my druthers, I would rather see the stupid drug "benefit" ended. Since the Republicans (who let this nonsense go through while in control of Congress) do not even control Congress at this point, there's no way now that we can end this fiscal nightmare before it becomes far too entrenched to be removed. At least we look at some ways to try and make it less burdensome. Outright buying of relevant patents and releasing them into the public domain might generate some overall savings.
If that happens, anything you own will also be worthless - might as well start living like cavemen.
I don't agree. I've found Gen X and Gen Y to be MORE conservative than their parents. Immigrants aside, that is...
I've railed against the Ponzi scheme we call Social Security for over 30 years and I've paid FICA taxes continuously since 1960. I even hit the cap when I was a captain on flight pay in the 70s. Now, just this month, I got my first Social Security check. I feel like I've gone over to the dark side, but what I need now is for everyone to keep paying and paying and paying those FICA taxes. Thank you very much.
You got that right...they admit as much. I remember when former US Senator and current NJ Governor Jon Corzine was running for his current seat...criticizing the far too modest plan of giving people the option of putting a small portion of their payroll taxes in personal retirement accounts...former Goldman Sachs CEO (and unrepentent socialist) Corzine said "the US government will always be able to meet its obligations because it can print money"
real financial wizard that Corzine is
President George W. Bush traveled April 5 to Parkersburg, West Virginia to visit the so-called Social Security Trust Fund: a filing cabinet filled with paper. "There is no trust fund just IOUs," backed by no economic assets whatsoever, Bush noted.
Senator Jon Corzine (D., N.J.) called the president's remarks misleading. In a conference call with journalists, Corzine said: "U.S. Treasury securities have the ability to be paid under any circumstances based on the ability of the government to print money." While Corzine's press secretary denies this comment was a concrete proposal, at this writing, the senator proudly highlights this quote on the front page of his website.
Should have made myself clear. I was discussing the boomer generation.
There is no way for them to meet those obligations. My guess is that they will begin radically means-testing Social Security benefits in the upcoming years, which means I won't get any, and neither will most people who have accumulated any real assets. I do not count on receiving a dime from SS. The interesting thing about this is how it affects my sense of loyalty to the USA. We are spending in a manner that makes no sense, running up fabulous credit shams in the name of "expanding," and engaging in empire building/maintenance in the name of "waging a war on terror." I am ready to take my assets, leave, and shoot Uncle Sam the finger on the way out. It really is only a matter of wanting to be able to return to visit family that keeps me from just renouncing my citizenship and leaving now. I never would have thought it would come to this.
I beleive the same thing. Us Americans will be diluted into 3rd-world citizens.
Your generation will be no better. Your only hope is to learn from our mistakes--don't elect politicians who want to use their position to strengthen their own power and prestige, but elect those who want to minimize the role of government. Be wary of the politician who wants to make government "more efficient"--that's a buzzword for bigger and more powerful. Elect people who want to make government fail, because that's the only way that the masses will realize that "government is not the solution--it's the problem."
Start buying gold now if you think that will happen.
Sage advice, I wish more people had the English Lit teacher I had in HS who pretty much said the same thing and spent most of the year having us study, in exquisite detail, Atlas Shrugged.
He was a rare gem.
Yep. The "Greatest Generation", whose ravenous pig-squealing appetite for entitlements has led us to this mess. But somehow it's the Baby Boomers' fault? Gimme a break.
* 81 percent said getting rich is was their most important or second most important life goal;
* 51 percent said the same about being famous;
You might say that it's the Boomers' influence that caused this. If so, might the Boomers blame their failures on those of the Greatest and Silent Generations for raising them improperly?
It's nice to have someone to blame, but history shows that prosperous societies eventually become soft, decadent, and complacent, and that's their downfall. It's human nature, and that's where we're heading.
You may be right but it is really hard to swallow the fact that I'm funding thier retirement with the money that was supposed to fund mine. Not only that but I have no choice in the matter. The gvt. steals the money from my paycheck each and every week I work.
Different levels of corruption, but at least when you pay em off, they stay paid.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
I won't reach retirement age for about 20 more years and I think by then it will be means tested at best. Retirement age will also be raised. Since I already have a military pension and IRA accounts, I've written off Social Security a long time ago. And I'll bet you a lot of others my age think the same way as I do.
I appreciate that, but it doesn't make me feel any better, it adds to the frustration. Oh how often do I wish for the ability to opt out of SS. That would be AWESOME!
A wise man would have his retirement money solely in cash. No way the IRA's will be free from the tax man in 20 years.
If we survive the crash we will return to the philosophy that you must be strong and self-sufficient to survive, the foundation that built the Greatest Generation, and that's a good thing. But it ain't gonna be fun. Steel yourself.
Damn Ron Paul and David Walker for speaking the truth! That is NOT allowed in Washington D.C. these days!
actually, many of us might find ourselves living in conservative communes....living off the land and sharing our resources and responsibilities.....I wouldn't mind it if I could live with people of similar morals and values.
this is similar to what's happening to my Catholic diocese here in Spokane Wa area.. re: priest sexual abuse of youngsters.....
we had NO say in what went on, we are told that the parishes belong to the parishioners...hah...yet we are now told that the parishes will have to fork over a year's worth of collections each to pay for this debacle.....
fat chance that this household will.....
just like the govt...we have no say in the taxes...we have no say no what they do with our money...yet they come back to us for more of it when they screw up.....
and some of the best conservatives are female....
besides the fact that many women make more money than their spouses and many women own their own homes......
but in general I would agree that home or property ownership would make someone's vote a little more realistis and practical....
I feel this way because we can all complain about SS and Medicare but the real deal buster will be these lavish govt benefits at all levels ....education, police, military, city, county, state, federal.....
there will be two types of retired..those with the guarenteed govt pensions and medical retirement benefits and those without either....
why should the same taxpayers who footed the bill for govt pensions also be the same ones suffering when there is no money for SS?
there will be means testing and it will affect anyone getting the defined pension plans bought and paid for by US taxpayers ....it has to be....
And so you get a return of 0% on that money? In fact, after inflation, it's a loss for you if you think about buying power.
How about we call it what it is - a massive fraud perpetrated on the American people by a criminal government - and abolish it?
Start buying gold now if you think that will happen.
The government's credit can never be ruined as long as there are hard working americans to tax and plunder and it has printing presses. They run low on cash and they just either print more or loot more.
You're confusing money and value.
I mean stocks, cash, those kind of assets...and probably real estate too...and your job? Bye bye.
Depends. I can see cash become worth less as the government tries to print itself out of debt, but that usually comes before bankruptcy. It might even be better for cash if the government simply goes ahead an defaults before they start running the presses overtime!
Private borrowing might become easier as money moves from public to private debt.
And as to stocks, well, if those companies are making what people want, a default on the national debt won't make much of a difference.
The trouble really comes from the actions of the government. If they just through up their hands there'd be little problem. But they have voters to payoff. And they'll be very angry when they find out they can't get their dole. I can see how the coming social unrest would hurt all those assets. Still, in the long term, the mounting debt does even MORE damage to things like stocks since they become targets of ever increasing taxes to support the debt. Bankruptcy would in effect look like a tax deduction.
But all that aside, it is fundamentally unfair for one generation to inherit the debt of another. We don't make children pay their parents debts when they die. Why should those children pay off a national debt they didn't create? Anyone that would lose money on government debt deserves the loss for knowingly trying to profit from a kind of slavery of later generations.
Roger that.....Hey, we won't have to pay the mortgage though....course there won't be a house....., but hey, I have "nukealert", I'll know what's hot at least....agh, how do I turn off the italics..............
This is why the liberal deficit spenders in Congress and the White House need to be replaced ASAP.