Skip to comments.Why Are We Going Broke?
Posted on 03/10/2012 4:54:06 AM PST by Kaslin
In the United States, the national debt now equals 100 percent of gross domestic product (GDP), and is still growing. With the retirement of the baby boomer generation, 78 million additional people will turn to the federal government for Social Security, Medicare and Medicaid benefits roughly $40,000 per beneficiary per year, on the average. If we continue on the current course, the federal government will need to more than double the tax revenues it now collects by the time we reach midcentury, according to the Congressional Budget Office. At the same time the government prepares to take more of our income, it is also making it increasingly harder to earn that income. Additional taxes and regulations are raising the cost of labor, reducing the rewards for working and making the economy less productive than it could be.
Why are we having these problems? What can be done about them?
The main reason for the growth of government in the 20th century was the creation of programs designed to protect the middle class against certain risks. This took the form of social insurance against contingencies most people could not easily insure against on their own in the private marketplace. In the United States, the federal government provides an income, pays medical bills and covers a large part of the cost of long-term care for people during their retirement years. For people of working age, the federal government is insuring against disability and unemployment. State governments are also involved forcing employers to insure workers for injury, death and disability on the job.
In almost all cases, government insurance is monopoly insurance, instead of a service that arose through competition in the marketplace. Government insurance is also subject to special interest political pressures that undermine its rational provision. As a result:
Social insurance is almost always more expensive than it needs to be. Disability insurance in the United States and Europe, for example, is twice as expensive as private disability insurance in Chile. Both Medicares health insurance for the elderly and the disabled and Medicaids long-term care insurance cost about twice as much as well-designed private insurance should cost.
Social insurance is impervious to consumer needs. Medicare, for example, covers many small expenses that the elderly could easily afford to pay for out of pocket, while leaving seniors exposed for thousands of dollars in catastrophic costs. Both Medicare and Medicaid prevent patients from adding out-of-pocket expenses to the governments fees in order to purchase timelier, higher quality care.
Social insurance is almost always one-size-fits-all, ignoring important differences in individual needs. Social Security, for example, completely ignores other sources of retirement income and prevents seniors from using their government annuity, say, to purchase assisted living.
Social insurance often provides benefits that are of poor quality. Many seniors, for example, pay three separate premiums to three separate health plans and yet still lack the comprehensive coverage that many nonseniors take for granted.
Social insurance is almost never accurately priced. Because unemployment insurance premiums fail to reflect the real probability of unemployment, the program actually encourages employers to provide seasonal, rather than year-round, jobs. Because workers' compensation insurance is not accurately priced, employers face highly imperfect incentives to make their work places safer.
Social insurance almost always creates perverse incentives. Social Security encourages early retirement. Medicare and Medicaid encourage the wasteful over-use of medical resources. Unemployment insurance is almost literally paying people not to work.
Long term social insurance is almost never properly funded. Because of the temptation to spend payroll tax revenues that are not needed to pay social insurance benefits on other politically popular programs, social insurance is almost always operated on a pay-as-you-go basis. This has resulted in huge unfunded liabilities both in this country and abroad.
Is there an alternative to all this? Fortunately, yes. Singapore is a country that has no social security system and it has also avoided most other welfare state institutions of developed countries. Yet no one in Singapore is starving. It has the highest rate of home ownership in the world and the vast majority of people reach the retirement age with substantial assets.
How do they do it? In Singapore, people are required to save a substantial part of their income to meet basic needs. But they have considerable discretion over how the funds are invested and they have very wide discretion about how they use their savings to meet their needs.
Chile is another country that has been exceptionally innovative in liberating people from social insurance institutions. Chileans are required to save in individual retirement accounts. But once they have saved enough to purchase an annuity to provide a minimum retirement income, they have complete discretion over what they do with the remaining funds even if they are only middle aged.
Chile also has the worlds most innovative disability insurance system and the worlds most innovative unemployment insurance system. Both systems involve substantial individual control over resources and leave individual workers with considerable freedom to make their own decisions.
Other countries around the world have been catching up. More than 30 countries have completely or partially privatized their social security systems with individually owned accounts. There is much to be learned from these experiences.
Mainly because that we allow fools, parasites, and idiots to vote. That results in Democrats and obamas in political office. They, in turn, legally steal from the producers and rightful owners of their goods,keep the lion’s share and return a miniscule portion to said fools,idiots, and parasites for their votes.
It’s all part of the plan - you have to destroy something in order to “rebuild” it in the image you envision. It’s actuallt Biblical and fore-ordained so we can look at Obama and the Left as facilitators of what God said would be done before He decides to come back and lay some whoop-ass on the Evil One and his minions. The irony is that THEY think they are in the driver seat and that they will not be on the bus when it takes a header off the cliff...
You have to love how the lib media wants us to focus on the “trend” of (part time) jobs created. Instead of the “trend” of debt, deficits, real estate, inflation, gas prices, etc.
It’s the socialism, stupid.
Concur. The only way to restore balance is to restrict the franchise by allowing only “real” taxpayers or veterans to vote. I say “real” because I don’t count people who pay only payroll taxes and get rebates from the Government instead of paying income taxes. The System has reached a tipping point because “real” taxpayers are now a minority. And we make it ever easier for people to vote either legally or fraudulently. And then there are the Government efforts to increase the number of client, either citizen or illegal.
In the end, only those with skin in the game should be allowed to vote. Of course, the only way this will happen is by a Second American Revolution.
Because the government educates our children to believe that taking money from people who've earned it is the new fairness.
Because our so-called media are willing to overlook, obfuscate and lie to protect liberal ideology and control.
Lastly, because the liberal left has fallen to humanism over deism - there is no God but man to them.
The new rally cry of many: Gimme...gimme...gimme. Pathetic losers.
This assumes that those in D.C. would want everyone to be on an upwardly mobile path. But most of those in D.C. would be delighted if we were all equally miserable, rather than some being more well off than others.
Where does that figure come from? I'm 66, on S.S. and Medicare and expenditures on me are no where near that number. I pay my medicare premium every month and don't even meet the deductible, where they have to start paying some on my medical bills. That puts me on the positive side of the Medicare ledger.
The only thing I can think of that would bring the average to $40,000 is there must be many people who are costing the system multiple thousand$ per year, thereby bringing the average up.
I think I found my own answer.
After all, I don't need a "free" scooter chair or an in home house keeper or nurse to come to my house.
Obama has piled 5 trillion in debt on us, that’s tens of thousand$ per working family.
We don’t produce anything but debt and print money thanks to Obama and democrats. Obama has piled on 5 trillion in debt on us, raised gas prices, let in illegals, exploded government growth,sent our jobs to China etc. : that’s why we are going broke.
We are borrowing ourselves “broke”. Every dollar we borrow or create out of thin air (and inflate), now creates less than a dollar of new GDP. If this was an airplane, the pilot would be operating it behind the power curve, and where contact with the ground was only a matter of time.
Well and also because of guys like McCain and other dumb corrupted losers and traitors
Criminal (treasonous) politicians
An un-vetted Kenyan sitting in the oval office
Too many no load parasites who pay no taxes, and a tax system that rewards not working.
As I read your post and agreed with you, I was going to ask you, “Where is your scooter chair?”
Somebody is using your and my $40,000!
I did not post the article Kaslin did
I just posted the pix of zer0 flipping the bird to America.
OK, thanks, it’s not the first time I’ve misdirected a reply and most likely not the last either.
Why is the media NOT talking about the Greece default yesterday, what it means to the PIIGS countries and the U.S.?
Hey, who’s gonna win American idol?
By law, the premium portions of Medicare Parts B and D only cover 25% of the costs. The rest must come from the General Fund. As the number of retirees increase (10,000 a day for the next 20 years) the entitlement programs consume an ever increasing portion of non-entitlement revenue. If unchecked, Medicare will consume the entire federal budget.
Medicare (Part A) has been running in the red since 2008, i.e., costs have exceeded the revenue from the HI payroll tax deduction. The Medicare Trust fund has been cashing in its IOUs to make up the difference, which means the General Fund must come up with the money to redeem them.
SS is in a similar situation and has been running in the red since 2010.
Source: CBO "Combined OASDI Trust Funds; January 2011 Baseline" 26 Jan 2011. Note: See "Primary Surplus" line (which is negative, indicating a deficit)
Matters are even worse than this chart shows. In December, Congress passed a Social Security tax reduction. Workers are temporarily paying 2 percentage points less, from 6.2 percent to 4.2 percent, in Social Security payroll taxes this calendar year. Since the government is making up the shortfall out of general revenues, CBOs deficit projections for the trust funds do not include that. But CBOs figures predict that the "payroll tax holiday" will cost the governments general fund $85 billion in this fiscal year and $29 billion in fiscal year 2012 (which starts Oct.1, 2011.) Since every dollar of that will have to be borrowed, the combined effect of the " tax holiday" and the annual deficits will amount to a $130 billion addition to the federal deficit in the current fiscal year, and $59 billion in fiscal 2012.
Social Security has passed a tipping point. For years it generated more revenue than it consumed, holding down the overall federal deficit and allowing Congress to spend more freely for other things. But those days are gone. Rather than lessening the federal deficit, Social Security has at last as long predicted become a drag on the governments overall finances.
“Why Are We Going Broke?”
Because neither socialism nor communism is sustainable. Every country that tries either eventually will collapse because such systems are complete violations of natural law. Things like poverty and social class are inherently part of humanity and cannot be eliminated. If one takes a look at nearly every country that has attempted some form of socialism, one can also see that nearly all of them are in debt over their heads, even with confiscatory taxes. We have being trying socialism- the New Deal, the Great Society, etc- and trying it without the heavy taxes. This our collapse will be a bit sooner in coming, but inevitable.
This graph shows that the average man and woman (average defined in the study as average income over their working lives and living to the average life expectancy) who start receiving benefits in 2010 get over 3 times more in benefits than they pay in to the system! Of importance, the study accounts for inflation by calculating all past taxes and future payments in 2010 dollars to provide an accurate comparison.
If the notion that Medicare recipients are simply "getting back what they paid in" is false then where is the money coming from? Simply, the excess received is being borrowed from younger generations and the cost is more than we can bear.
Our checkbook is 22 TRILLION DOLLARS in the red... but things are ****ing great! NOT!
GB, according to kabar’s graph, we must not be the norm. It will be awhile before I require more from Medicare than I paid in.
I am blessed with good health and good insurance. How about you?
“I am blessed with good health and good insurance. How about you?”
Pretty much both. My former employer is my secondary insurer and that’s getting costly but I have a wife and two more dependents that aren’t on Mediicare and my former employer is their only insurer.
I can’t leap tall buildings in a single bound any more, it takes me two or three bounds now but other than that I’m fairly healthy.
Wanna see energy? read my g/daughter’s “about” page.
Because value is not durable. If the value created is less than the value consumed/destroyed, no amount of redistribution will restore balance.