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The Entitlement Titanic

In the context of the GOP’s fiscal irresponsibility, the bipartisan entitlement time bomb continues to count down, unabated. 

Summary

The world’s entitlement programs (and trillions more in other unsecured obligations that federal, state and local governments have taken on) are crushing the people’s prosperity – progressively. 

Introduction: “The Deficit” pretext

Press a major party politician to address a “serious” issue – say, the federal government’s massive budget deficit.  Then witness these events:

They yawn.  Perhaps, they cobble together a moribund PowerPoint presentation (with bar charts) on “The Deficit”.  They close with an emotional moral pitch: “We’re saddling America’s youth with a huge and growing debt!”  Now, you yawn.

A deeper look at the bipartisan hand wringing about the deficit shows that these politicians are “not serious” in other ways:

1.      They are the same guys who created the problem.  They are the same guys who are sustaining it.  Their stand against deficits – long, strong and resolute – is strictly rhetorical.  

2.      “The Deficit” usually covers a deeper issue: How big you want to make the government?  Tax-cut foes are typically closet Big Spenders, possessing a secret agenda of unmet social needs. 

3.      Finally, bipartisan hand wringing about the deficit is “worrying about a bad hair cut while someone is cutting your throat”.  Social Security, Medicare, Medicaid, the unfunded pensions of state, local and federal workers, etc. are placing a $74 trillion-plus unsecured obligation on America’s young people.  It dwarfs the $8-trillion public debt. 

What will the explosion look like?

Without fundamental reform, an international entitlement nightmare is inevitable: a colossal international fiscal meltdown – horrific and unprecedented in human history. 

And predictable. 

Domestically, the first of 77 million baby boomers will retire in 2011.  Increasingly, wage earners (entitlement contributors) will become entitlement recipients.    By 2018, Social Security taxes will exceed payouts, hastening insolvency. 

Internationally, America’s principal trading partners will suffer from more extreme Ponzi schemes.  Their entitlement payouts are more generous.  Their populations are older.  Low birth rates and low immigration rates mean they have even fewer young people than we do to bear the fiscal burden.  America’s trading partners will come to America with their bill: accumulated balance of trade payments; they will sell American stocks, real estate and bonds to fund their exploding entitlements outlays. 

A worldwide crash. 

How the press runs interference for bipartisan government

The bipartisan press fails in two principal ways to meet its responsibility to inform the people in their news accounts of the federal budget deficit: 

  1. They fail to identify Social Security as a Ponzi scheme, which has an inevitable day of fiscal reckoning, like all Ponzi schemes.  (This is why we outlaw private Ponzi schemes.) 

  2. In the last four years, the federal government’s spending has been growing far in excess of inflation and population growth.  In asking politicians how they would lower the deficit, the press limits its questions to raising taxes. 

  3. They fail to provide the appropriate context for intelligently assessing the deficit or “public debt”: the relative size of Social Security and Medicare’s burden on America’s youth. 

Journalistic irresponsibility facilitates Democratic and Republican politicians’ fiscal irresponsibility. 

Questions

  1.  If it’s wrong to stick young Americans with a $8-trillion public debt, why isn’t it worse to stick them with a much larger entitlement bill (at least $74 trillion)? 

  2.  Historically, the government has grossly underestimated the costs of entitlement programs.  For example, when Medicare passed in 1965, its predicted cost for 2003 was $26 billion.  The actual cost was $245 billion.  Shouldn’t estimates of entitlements’ expansion, like the recent prescription drug benefit, be received more skeptically? 

  3.  What is the market value of annuities that match benefits of Social Security and Medicare?  This number reflects the real cost of these programs.  The federal government does not publish this number.  Again, if we report the growth in the public debt, shouldn’t we also accurately report the federal government’s exposure from entitlements?  Isn’t it important to enable people to track this number and judge how the feds are managing this colossal debt? 

  4. How many of the national press’ editorials comment on the $8-trillion public debt?  How many of their editorials comment on the $74 trillion-plus unsecured obligations from Social Security, Medicare, etc.?  Why the difference? 

  5. Many who oppose structural reform of Social Security base their arguments on the fiction of the Social Security Trust Fund.  They believe that we can draw upon on this colossal fantasy fund as the baby boom generation begins to retire.  Why can’t the press this transparent canard?

  6. In the last four years, the Republican Administration and the Republican Congress have looted the Social Security Trust Fund.  The Democratic Congress has looted about $500 billion the Fund from 1983 through 1994.  Any corporate leader who looted a company pension would and should go to prison.  What are the moral and legal differences?