While it comes as no surprise, both Medicare and Social Security are financial disasters waiting to happen. In a report issued today by trustees of these two large government programs, while the dates of bankruptcy are unchanged, the date of the programs being cash flow negative have moved up to a date closer than was previously thought.
According to an AP report: " The first year that payments will exceed income for Social Security will occur in 2017, just nine years from now, reflecting growing demands from the retirement of 78 million baby boomers. Medicare is projected to pay out more than it receives in income starting this year.
"The financial difficulties facing Social Security and Medicare pose enormous challenges," the trustees said in their report. "The sooner these challenges are addressed, the more varied and less disruptive their solutions can be."
One of the Trustees is none other than Treasury Secretary Henry Paulson. Paulson was very pessimistic about the future of the programs.
The AP report continued: " Without change, rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues and threaten America's future prosperity," Paulson said in releasing the new report. "Our nation needs a bipartisan effort to strengthen both programs for future retirees."
I posted last week about the need to move to a private pension system along the lines of Chile. Since starting their reform in 1981, returns have been over 10% annually. Workers stand to receive over 80% of their final salary as a pension, about double what Social Security will pay out. That is if you are lucky enough to get it before it goes bankrupt.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 3/25/08
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Reader Comments (Page 2 of 2)
5-03-2008 @ 8:55PM
bc9021010011 said...
This is fatcat corporatocracy propaganda from the Neo-Con Cato Institute, calculated to place the trillions from Social Security into the hands of Wall Street bankers, like Bear Stearns for example.
For twenty years the Cato Insitute has had a war room on its premises dedicated to dismantling Social Security. Funded by financially-interested corporate sources, Cato has spent millions lobbying for this cause, churning out one "scholarly" rationalization after another and supplying the O'Reilly-Limbaugh faux-news axis with a cornucopia of dumbed down talking points.
The Bush regime has hired half a dozen Cato Institute wonks for its Orwellian "Commission to Strengthen Social Security," whose mission is to do away with Social Security and get the American public to accept that its demise is somehow in their best interest.
Cato's founder Ed Crane has publicly stated his mission is to undo the New Deal "nanny state" created by Franklin Roosevelt. Cato counts among its minions Las Vegas entertainers Penn (Jillette) & (Raymond) Teller, who are paid millions to spread the Cato gospel to a new audience in their Viacom/Showtime series "Penn & Teller's Bull****."
4-06-2008 @ 2:03PM
Robert Copeland said...
The Ant and the Grasshopper
OLD VERSION:
The ant works hard in the withering heat all summer long, building his
house
and laying
up supplies for the winter. The grasshopper thinks he's a fool and laughs
and dances and
plays the summer away. Come winter, the ant is warm and well fed. The
grasshopper has no food or shelter so he dies out in the cold.
MORAL OF THE STORY: Be responsible for yourself!
=============================================
MODERN VERSION:
The ant works hard in the withering heat all summer long, building his
house
and laying
up supplies for the winter. The grasshopper thinks he's a fool and laughs
and dances and
plays the summer away. Come winter, the shivering grasshopper calls a press
conference
and demands to know why the ant should be allowed to be warm and well fed
while others
are cold and starving. CBS, CNN, NBC, and ABC show up to provide pictures
of the
shivering grasshopper next to a video of the ant in his comfortable home
with a table filled with food.
America is stunned by the sharp contrast. How can this be, that in a
country
of such wealth, this poor grasshopper is allowed to suffer so?
Kermit the Frog appears on Oprah with the grasshopper, and everybody cries
when they sing "It's Not Easy Being Green." Jesse Jackson stages a
demonstration in front of the ant's house where the news stations film the
group singing "We shall overcome." Jesse then has the group kneel down to
pray to God for the grasshopper's sake.
Tom Daschle , Dick Gephart, Hillary Clinton and Howard Dean exclaim in an
interview with Peter Jennings that the ant has gotten rich off the back of
the grasshopper, and both call for an immediate tax hike on the ant to make
him pay his "fair share."
Finally, the EEOC drafts the "Economic Equity and Anti-Grasshopper Act,"
retroactive to the beginning of the summer. The ant is fined for failing to
hire a proportionate number of green bugs and, having nothing left to pay
his retroactive taxes, his home is confiscated by the government.
Hillary Clinton gets her old law firm to represent the grasshopper in a
defamation
suit against the ant, and the case is tried before a panel of Federal
judges
that Bill Clinton appointed from a list of single-parent welfare
recipients.
The ant loses the case.
The story ends as we see the grasshopper finishing up the last bits of the
ant's food while the government house he is in, which just happens to be
the
ant's old house, crumbles around him because he doesn't maintain it.
The ant has disappeared in the snow. The grasshopper is found dead in a
drug-related incident and the house, now abandoned, is taken over by a gang
of spiders who terrorize the once peaceful neighborhood.
4-08-2008 @ 6:34AM
Sara said...
This is all popycock. I say lower the age back to 55. Don't you see what they're doing? You pay in, they spend it. That is misrepentation of funds to put it nicely. Yeah, they want to raise the age, in hope you will die before you ever get it. What happens if your say 30 and worked since 17, not married or have children, all the money you put in but what 250 or so to bury you..good luck with that..rest they stick in their greed fat pockets. They should be held accountable for all the money people put in, it should be audited, that taken out already should be payed back to its owners with interest. There in it for themselves folks, time to fight back. Yeah put it in the stock market, trust that, so when the day you retire it suddenly crashes, might as well stick it in a slot machine.