With a sluggish economy, uncertain job growth, the most serious housing recession in more than 20 years, record oil and gasoline prices, ramping food costs, and a foreign policy landscape that's challenging (to say the least), decision makers in the United States, public and private, have more than enough to be concerned about, near-term, most analysts and citizens would agree. Still, the above wasn't enough to prevent the annual "alarm sounding" about long-term concerns, such as Social Security and Medicare, the likes of which occurred again this week when the Social Security Trustees released their revised 2008 actuarial balance, which is a status report.
Moreover, while it's never prudent to ignore the tax and benefits implications of entitlement programs as large as Social Security and Medicare, it's important that investors and taxpayers also keep in mind one undeniable reality pertaining to statistical analysis of this sort. Namely, that we're dealing with longitudinal projections stretching out decades in which -- if any one of 20 variables (or more) change -- receipts and outlays would change substantially.
Here's an example of what just a few changes might produce:
- A rise in immigration would add workers to the Social Security system, increasing receipts during a time of increased outlays as the Baby Boom generation retires.
- Better-than-expected U.S. GDP growth over the next decade would increase incomes -- and Social Security receipts (revenue) collected -- above current projections.
- The U.S. Congress is unlikely to pass it, but a 10% increase in both the employee- and employer-based payroll tax that supports Social Security would postpone the so-called debt year, 2017 (estimated) -- when Social Security starts paying out more than it receives -- by at least five years. Raise the income eligible to be payroll taxed to $100,000 (again, something Congress is unlikely to do) and the date gets pushed out further. Raise the income eligible to be payroll taxed to $120,000, and the date is pushed out even further.
- If nothing, nada, niet, is done to bolster the system, Social Security would still receive enough revenue to pay 78% of benefits until the trust fund ran out of money in 2041 (estimated). In other words, starting two years from now the U.S. has about 30 years to get the receipt and outlay lines headed in the right direction. That's thirty years. Care to contemplate the scope/potential for economic and technological change, and progress, in 30 years? Imagine yourself being able to travel back in time and trying to explain what a car was to someone living in 1890. Or what nuclear technology was to someone living in 1915. Or what the Internet was to someone living in 1965.
- Medicare expenses remain a hurdle, but a variant of the law of diminishing returns argues that at some point, health care cost increases have to slow. This will support the Medicare system's solvency. Still, Medicare taxes may have to raised.
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Reader Comments (Page 1 of 1)
3-27-2008 @ 3:07PM
Barbara Broughton said...
Here is an idea! Bring jobs back to the U. S. and then we would have more people paying into the system thereby delaying Social Security going broke. It might even fix the problem. This might be to simple.
3-27-2008 @ 4:36PM
gumby said...
zero emission firewood now!!!
3-27-2008 @ 4:38PM
gumby said...
Health industries want us to keep sucking in firewood smoke and get cancer, mental illness like dementia or Alzhemiers, lung diseases so that we will flow into their hospital factories...
zero emission firewood now!!!
3-27-2008 @ 7:00PM
william lindblad said...
Leaving an intelligent comment might be in order---
While just about everyone, Mr. Lazzaro included, thinks that S.S. is a pure entitlement program, it only shows how little of government is understood. First, let me be clear, I am talking about Social Security. Do your homework and review F.D.R's brilliant piece of financial trickery and you will note that it is a TAX and how the money moves and what it does is the wizardry. Put a little time into this and you will soon be a believer that the government cannot allow it to go broke. Medicare is a separate entity and it IS a massive cost problem. The only solution at the moment would be to decrease it's payment areas and that is already sparse. Medicare is no panacea and is stop gap health insurance at best. Worth note: the U.S. has a health insurance and health care problem, part due to the size of the country itself and our national and state structure. While Mike Moore poked fun at it, comparing the U.S. to Small countries that have nationalized health care and decent control over their facilities and care givers salaries, such a system would be near impossible to implement in the U.S.
Anyone with a working solution should run for national office - make it work and you could live in D.C. for life.
3-30-2008 @ 9:25AM
Charlie said...
Do any of you remember how much fun was poked at Al Gore when he said Social Security (SS) should be kept in a lock box? There was much wisdom in his statements.
Understand that SS has never been put in General Funds, however an ammendment was passed allowing the US Treasury to dip into the SS Trust Fund to take out loans to use for other purposes unrelated to SS -- like Defense, Foreign Aid, etc. The US Treasury borrows $$$ from the SS Fund and backs up the loans by putting US treasury notes, bonds, etc. into the SS coffers plus gained interest on the loans. In other words, they are raiding SS funds and stuffing the fund with pieces of paper. Huh? Here's the problem: When those Treasury notes and bonds come due to SS, the US Treasury WILL NOT have enough money to pay back all that $$$ borrowed from SS over the years. So in essence, the government has been using SS funds to finance war, foreign aid and education which is totally unrelated to retirement funds. See why Gore's lock box theory was so vital? When it is time for the Fed. Government to pay the piper, they will simply pull their pockets inside out and simply state, "We can't come up with the money owed," and retirees can bend over once again.
4-08-2008 @ 12:44PM
Mozelle said...
Social Security and Medicare are not what they are cracked up to be.
They are practically useless at this time.
One... you cannot live on SS alone!
Two... Medicare covers practically nothing.
Medicare plan "A" covers basically nothing, so you must carry Medicare plan "B" for $98.00 per month! This $98.00 per month automatically comes out of your already low Social security check.
For two retired people that is $200.00 per month they are paying for insurance on top of already paying 1.5% of their wages into medicare for about 40 years while working, lol.
No doctor will see you with just medicare plan "A"
You must carry plan "B" if you want a doctor to see you!
To anyone working and not retired as yet, I have this advice! Save all your money! You will need it!