Tuesday, January 15, 2008

Beg, borrow, or steal - we can't pay for entitlements

Here's Pat Buchanan with "Subprime Nation"

Since it began to give credit ratings to nations in 1917, Moody's has rated the United States triple-A. U.S. Treasury bonds have been seen as the most secure investment on earth. When crises erupt, nervous money seeks out the world's great safe harbor, the United States. That reputation is now in peril.

Last week, Moody's warned that if the United States fails to rein in the soaring cost of Social Security, Medicare and Medicaid, the nation's credit rating will be down-graded within a decade.
And here's Fed chair Ben Bernanke a little more than a year ago:

To get a sense of the magnitudes involved, suppose that we tried to finance projected entitlement spending entirely by revenue increases. In that case, the taxes collected by the federal government would have to rise from about 18 percent of GDP today to about 24 percent of GDP in 2030, an increase of one-third in the tax burden over the next twenty-five years, with more increases to follow.
So, taken together, when the entitlement tsunami hits we won't be able to borrow any more money due to our damaged credit and we won't be able to raise revenues because Americans simply will not pay an additional third in taxes to support programs that will be bankrupt by the time they retire.

This is a fine mess we're in. Are there any adults in Washington, or is this just an endless game of "kick the can"?


Anonymous said...

But Eric, it's an ENTITLEMENT!!!!

I EARNED it by virtue of being an American.

Gimme! Gimme! Gimme! Gimme! Gimme! Gimme! Gimme! Gimme!

Screw the furture! Screw the people who will actually NEED social security! Screw the kids!


skeneogden said...

The eventual "solution" will be means testing. For all of us who have thought ahead and put a little away the government will reward us by reducing our SS benefits.

The politicians will not risk intergenerational warfare (and its ramifications for their job security) by significantly raising taxes to cover promised SS benefits.

If you're counting on SS as a major part of your retirement planning you might want to rethink that strategy.

Anonymous said...

skeneogden: "If you're counting on SS as a major part of your retirement planning you might want to rethink that strategy."

Spot on. If for no other reason than SS was never intended to be a retirement plan. For the vast majority of Americans, SS is just another part of the taxes we kick-in on a daily basis.

Personally, I'm planning on receiving zero SS dollars.