September 30, 2012
The impending entitlements crash
The U.S. entitlement train, with 78
million baby boomers aboard, is hurtling along at ever-increasing
speed toward a crash which will cause massive disappointment and
suffering. The boomers expectations of receiving their long-promised
Social Security and Medicare benefits, will inevitably crash into the
impenetrable barrier of our future economic reality. While the crash
cannot be avoided, it doesn't have to be sudden and violent. It could
instead be a slower, less painful series of minor collisions, if our
elected leaders and their followers from both parties would
immediately find the courage and wisdom to acknowledge this certain
reality.
I've seen estimates that place this
debt as high as $100 trillion. This future crash all began back to
the mid -1960s when our government decided it needed more revenues
than were coming in from taxes. Our lawmakers spotted the current and
future pots of gold of the Social Security and Medicare trust funds,
and just couldn't avoid the temptation of "borrowing" some
of this idle money to use for current needs. They came up with the
idea of borrowing/spending the trust fund cash now and replacing it
with a special version of government bonds. These bonds are special
because they cannot be purchased by anyone outside of the U.S
government. This means these special bonds, which will require future
additional federal revenues to redeem, have replaced real cash with
additional future debts. They are simply IOUs from one branch of
government to another. The problem is the only sources of revenues
available to pay back this borrowing will require some combination of
extra tax revenues, additional borrowing, or massive spending cuts.
This is how the pending crash scenario
was born and what is meant by unfunded entitlements. In this case, as
with most others, our politicians have not demonstrated any concerns
about long-term issues beyond their own election cycle. The powerful
special interests who fund their campaigns also have short-term
appetites. As a result, our elected haven't worried about the future
of we the people or our children. They must assume future generations
of politicians will find viable solutions. The phrase kicking the can
down the road comes to mind!
What generations of our elected in
their corrupted DC environment should have seen, but clearly chose to
ignore, was the projected shrinkage in our population growth also
beginning in the early 1960s. This additional fact added to others
helped create the perfect storm of unfunded entitlements we face
today. We simply have too many future retirees depending on too few
tax-paying workers, combined with severely depleted trust funds, on
top of our accumulated massive federal debts, continued deficit
spending, and a weakened economy.
In the 1950's, the U.S. birthrate
(births per family) which stood at 3.8, has steadily declined since,
and today is half of what it was back then. Of interest, every
developed nation in the world has experienced the exact same
shrinking birth rate phenomena, and most are even worse than the U.S.
All are also facing the exact same entitlement scenarios. It's
interesting how the leaders of most of these nations were able
to forecast their lower population growth beginning in the late
1970s, and then use immigration to supplement their work forces. In
Europe they did so with legal work permits. In America our leaders
chose to allow illegal immigration. Both are examples of short-term
thinking, and both methods solved short term problems, but created
other future ones with Muslims in Europe and Hispanics in America.
Our lower birth rate will result in us having
fewer than two FICA paying workers per
benefit-entitled retiree. Then think about all of this in the context
of our politicians being completely unable to make even a small dent
in our current debt and their continued deficit-spending.
Meanwhile, instead of uniting, we and
our chosen party's leaders continue to just play the blame game
toward those in the opposite party. Neither side has the courage to
honestly confront these challenges. Nor will they tell the American
people the truth about what will be required to prepare for the
impending entitlements crash which will have unimaginable
consequences for the boomers and our nation's future descendents.
It seems clear many of us are in a
perpetual state of denial about this reality. This is shown by our
continuing blind allegiance to our two broken parties who are both
operating in the same corrupted system. As the old saying goes:
"Power corrupts; absolute power corrupts absolutely". We
the people have ceded this absolute power to those we elect to
represent us, by turning a blind eye to their actual performance for
generations, and by re-electing incumbents over 90% of the time. Our
elected don't respect our wishes and they certainly don't fear us.
And so, the entitlement train hurtles down the track toward a certain
catastrophic collision. We have nobody to blame but ourselves! Our
leaders need to make tough choices, and if they all continue to
listen only to the voices of the special interests...we will soon be
finished as a nation!
