Why I’m Not Counting on Getting Any Social Security

Although I don’t post much of a political nature, Mike Gasior makes some important points on the state of our country on this election eve:

Beginning sometime around 2008, and worsening further and further for the next decade, Americans will see the following:

–Massive increases in Federal, State and local taxes.

–Substantial cuts made to their Social Security and Medicare.

–Substantial cuts made to their government pensions and retirement health benefits.

–A bitter and volatile generational war pitting the “Greatest Generation”

of World War II paired with the “Baby Boomers” against “Generations X and Y”.

For a change, these are not any sort of predications being made by me.

These are absolute facts of life and backed up by an army of people who know the details of the situation far better than I do. Consider this quote by David Walker, who is Comptroller General of the United States and is employed by the government as its chief accountant:

“I am desperately trying to get people to understand the significance of this for our country, our children and our grandchildren. How this is resolved could affect not only our economic security but also our national security. We’re heading to a future where we’ll have to double federal taxes or cut federal spending by 50%.”

Every single year the Social Security and Medicare trustees tell the Congress the awful truth, which is that they have absolutely no way to pay for their programs even if the economy were to reach levels of prosperity never seen before.

The Congressional Budget Office updates the Congress constantly about the level of the liabilities being bourn by the government, and the politicians listen to the reports and mention nothing of them on the campaign trail.

So here are some of the numbers that the trustees and the CBO share with Congress that you might have never heard before. In trillions of dollars, here is the list of liabilities carried by the United States Government and local governments:

–$4.2 trillion of Federal borrowing

–$3.9 trillion of Federal and military pensions

–$30.0 trillion in Medicare benefits

–$12.7 trillion in Social Security benefits

–$0.2 trillion in misc. Federal obligations

–$2.0 trillion in State and local debt

The total of all these liabilities is 53 trillion dollars. I apologize in advance for pointing out what may be obvious to some, but perhaps not crystal clear to others. I want people to remember that the fact that these are being referred to as “liabilities” is because they are in effect debts owed by the government. These liabilities have not been funded in any way, shape or form and will need to be repaid by taxpayers in the future and that future is now only a few short years away.

USA Today ran a terrific headline that I thought captured the heart of the matter in a very succinct way. In a very large, red font it showed these two numbers:

–$85,454 is the average household’s personal debt

–$473,456 is the average household’s share of this $53 trillion of liabilities

One other elementary thing I want to also remind you of is that the $53 trillion is how much the liability is right NOW!! Not how much these liabilities are going to cost over their lifetime. If the government were required to fund these liabilities the way a corporation would be required to, the government would need to put away RIGHT NOW the $53 trillion so that there will be the money available to pay for these programs in the future.

If you don’t keep track of these numbers on a regular basis, the U.S.

government collected a grand total of $3 trillion in taxes in 2003. This fact causes you to wonder where in the heck the government is ever going to put together the money to back up these programs. Well, clearly, they are not going to be able to do that. So what are they going to do instead?

Here is where things become somewhat imprecise since all the choices that will be open to politicians are horrible. If the new crew of elected official who will take office for the year 2005 wanted to step up and actually fix the situation immediately, here are two solutions that would render the problem fixed:

–They would have to immediately double all federal taxes beginning immediately in the 2005 tax year and make these increases permanent. All state and local taxes would also need to be increased by 20% immediately in the 2005 tax year and made permanent also.

–Or they could simply reduce all Social Security, Medicare and government pension payments immediately and permanently by 50%. The average Social Security check would drop from the current $1,500 monthly to $750 immediately. A government military pension monthly payment would be instantly cut from the current $1,782 to about $891. And Medicare spending would be reduced from an average of $7,500 per person to $3,750 for senior citizens. Also, the Medicare prescription drug benefit plan that passed last year will need to be cancelled.

Obviously the politicians could also blend the two solutions in whichever way resolves the pending implosion of the situation.

If your gut reaction to reading what I have written so far is that you cannot imagine politicians doing ANYTHING to fix this crisis, then the day of reckoning only becomes darker and more gloomy.

And before you go blaming this situation on George Bush or any of the current crop of politicians, don’t bother. This problem has been in making for the past 60 years and no one has stepped up in any earnest way during that timeframe to offer solutions. Of course, the current office holders haven’t done anything to make progress toward answers, but I resist making any John Kerry type of blaming which would likely lay this whole mess at the feet of Bush. Given that Kerry has spent almost 20 years in the U.S. Senate compared to Bush’s three and half years, and has voted for nothing but benefit increases for all these programs he would be well advised to keep his mouth shut regarding this issue.

So how did we end up in this horrible jam? Well, simply, the World War II generation and Baby Boomers have granted themselves all sorts of wonderful retirement benefits and have contributed very little toward financing them; basically leaving the bill for their children and grandchildren. I liken it to someone inviting you out for a wonderful meal, stuffing themselves like gluttonous pigs and then sticking you with the check. One can only figure there might end up being some lingering resentment and anger as the government pins this tab on Generations X and Y who I would suspect might be reluctant to pay for all this nonsense, and who could blame them? This is where the generational warfare might begin sometime no later than 2015 I figure.

I wish there was some “silver lining” to this whole fiasco, but I cannot imagine one and neither can you. All outcomes are gut wrenching and ugly and all we can be certain of is that it will take a crisis mentality for the politicians to get off their rump and do something about, and that crisis is not probable but guaranteed.

It was not my wish to bum anyone out, or set a negative tone for your day.

Anyone reading this already knew that the system was broken, and the younger the person, the more likely they weren’t counting on ever getting their Social Security. If Americans want to ensure a comfortable old age, they will need to abandon their consumerism and embrace dedicated savings for their future as well as watching their own levels of debt. Readers of this hideous newsletter count on me being honest with them and that is what I am attempting to do when I don’t hear a single politician sounding an alarm. I won’t be the government who pees on your leg and then tries to convince you it’s raining. Nope. This time the government is just plain peeing on your leg. Your choice is deciding what you want to do about it and remember to get out there and vote.

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  1. Good artical. I agree the federal deficite is at an alarming rate. I wonder what would happen if the federal government decided to invest into private organizations (i.e. Microsoft, Mcdonalds, Google, etc…). Since the feds own the SEC I’m sure the general tax laws, typical for equity, could be waived. This approach would definitly be risky, but desperate times call for desperate measures.

    -Jeremiah P.