Yes, Boomergeddon Still on Track

obamaby James A. Bacon

President Barack Obama seemed pretty darned impressed with his economic and fiscal stewardship of the United States during his State of the Union speech last night. “We’ve seen the fastest economic growth in over a decade, our deficits cut by two-thirds, a stock market that has doubled, and health care inflation at its lowest rate in 50 years,” he crowed.

Let’s unpack that statement. Yes, we have seen the fastest economic growth in ten  years — which is a real indictment of the economic growth before the last two quarters. The last time we had economic growth this strong was… yikes!… during the George W. Bush presidency!

Yes, our deficits have been cut by two-thirds. The FY 2014 deficit was “only” $483 billion — one-third the $1.4 trillion deficit in in FY 2009. Unfortunately, the deficit is still massive by historical standards, and the Congressional Budget Office (CBO) expects the deficit to start climbing in FY 2016 to nearly $1 trillion by 2024.

Yes, the stock market has doubled. That’s one thing we truly can credit Obama’s economic policies for. The Federal Reserve Board’s zero-interest rate policy, pursued with the full backing of the administration, has pushed the stock market to record highs. As a small-time stock investor, I’m grateful. I’m sure America’s millionaires and billionaires are grateful, too. The poor and middle class, not so much.

Yes, health care inflation is at its lowest rate in 50 years. Of course, that has absolutely nothing to do with Obamacare, as many assume. The cost curve in health care started bending before Obamacare was implemented, and the slowdown in increasing costs mainly reflects private-sector strategies: (a) efficiencies gained by the consolidation of the hospital industry into health systems, and (b) the shifting of private-sector plans of costs to employees, in effect forcing them to exercise more diligence as health care consumers. To quote PWC:

Doctors and hospitals are adopting standardized processes that offer the prospect of better value for our health dollar. At the same time, consumers are starting to price-shop for health services and put new demands on the delivery of care. Over one-quarter of employers have a high-deductible health plan as their highest enrolled medical plan in 2014—the highest percentage ever. With more individuals making healthcare purchasing decisions, value and price are the new mantra.

Ironically, the federal government, which pays for Medicare and Medicaid, is the biggest beneficiary of these changes. Because health care is the biggest single driver of expected deficits, “bending the curve” of health care inflation could make a big difference over the long term. Let’s just be clear where those cost savings are coming from.

So, is the U.S. still headed to Boomergeddon? The spending discipline imposed by sequestration has made a difference. My prediction, made in 2010, of fiscal calamity by 2025 to 2027 now looks excessively pessimistic. Calamity may be forestalled until 2030 or so.

Only a fool would think the U.S. is out of the fiscal woods. The CBO says that, without major policy changes, built-in structural deficits will grow relentlessly from hereon out. The projection goes out only ten years, but by year eleven, the deficit likely will be running at 1 trillion annually. Meanwhile, we have unresolved problems looming like the Social Security Disability Insurance trust fund running out of money next year, triggering a 20% cut in benefits to the disabled. Congress likely will shore up the program by reallocating funds from the Social Security Old Age & Survivors Insurance fund, but that will accelerate the day when both funds run out of money — in 2030.

In effect, that means we have 15 years to fix the largest and most critical component of the U.S. social safety net. It is theoretically possible to restore the Social Security system to health if we make a series of tweaks that make a difference over a long period of time. But the longer we wait — and it doesn’t look like anyone is in a hurry to act — the bigger and more politically painful those tweaks will have to be.

The U.S. is deep into one of the longest (though weakest) economic recoveries in its history. Another 10 years of steady economic growth would be unprecedented. There will be another recession. Hopefully, it won’t be nearly as calamitous as the last one, but it will drive deficits higher. The reversal of Federal Reserve Bank’s quantitative easing will have an impact, too. The Fed has been handing over nearly $100 billion a year in profits, resulting from its purchase of long-term bonds and its manipulation of interest rates, to the U.S. Treasury. As interest rates resume their climb, that source of pain-free deficit reduction will evaporate. Meanwhile, it’s becoming increasingly evident that our precipitous withdrawal from the Middle East is not sustainable from a geopolitical perspective. We would like to walk away from the Middle East but al Qaeda and ISIS don’t seem to want to walk away from us. There will be considerable pressure for defense spending to increase.

Without dramatic corrective action, we’re still heading to Boomergeddon. I would expect a major fiscal-financial crisis around 2030 when the combined Social Security trust fund runs out. With a divided government in Washington, D.C., there’s no chance of getting that corrective action over the next two years. After that? Who knows.

There are currently no comments highlighted.

33 responses to “Yes, Boomergeddon Still on Track

  1. Historic deficit as measured by what? Total dollars? Well that’s deliberately obtuse. Take inflation and the growth of the US Economy as a whole which reflects population increase, complexity of function, etc into account. IE, compare it apples to apples via GDP vs deficit. Now how does it look?

    • Deficits and the national debt as a percentage of GDP has stabilized briefly, but both will climb in the years ahead.

      • Jim – can you tell us what parts of the budget are expected to cause the problem in the future?

        Also – can you contrast and compare the economy of the US with the rest of the world?

        I don’t think we are out of the woods but clearly you are wrong on Boomergeddon in the shorter term – and now you are relying on unspecified things in the budget rather than explicitly identifying why the structural deficit will increase.

        what did you say was going to happen in the longer run in Boomergeddon before all the stuff that has happened since then – today?

      • How so? What if GDP grows at 5% a year for the next 6 years… something that isn’t far flung considering the economic bastion the US currently is. That growth, tied to current spending levels and projections would continue to shrink the deficit and go to surplus.

        6 years of 5% growth would do a lot to end deficit worries don’t you think?

        I’m not arguing entitlements arent too expensive and we should reform them somewhat, I just don’t think its as dire a situation as some would say.

        • Yup, if economic growth averaged 5% for the next six years, we’d be in much better shape than we are today. But it’s a fantasy-land projection. It has maybe 0.1% likelihood of happening.

        • Let’s be realistic: the economy will not grow at 5% for the next 6 years. A sustained growth of 2.5% – 3% is what we should expect. That, and the absence of any policy based on ‘dynamic scoring’ will take care of the debt, not just the deficit. As an aside, let us always remember that dynamic scoring, and the rest of the Laffer philosophy under Reagan and Bush, along with the Republican tendency to just spend and spend, and then borrow, are responsible for about 75% of the debt.

          • “national security” which is 1/2 DOD and the other half – Homeland Security, border patrol, FBI/CIA/NSA NASA, dept of energy – and the VA total up to
            be more than one trillion in spending when our total revenues are 1.5T.

            they say that DOD is “only” 5% of our GDP.

            I ask – who in their right mind compares their spending to productivity?

            No company does that…

            and when you get right down to it – entitlements are ALSO about 5% of our GDP ( GDP=15T). So the whole argument is ignorant and the gullible buy it.

  2. Ha Ha Ha. No climate change, either. College kids are drunk and promiscuous.

  3. Fair enough as far as it goes, except for the snide comments. What you don’t mention is that the primary deficit driver is Medicare. What’s your solution for that – and is it one that Republicans will endorse? That’s the dilemma that Republicans (and those independents like yourself who support them) face – how can they criticize the Democrats when they are unwilling to do anything themselves? Now that we have a Republican Congress and Republicans control most state houses, what will they do to control the deficit? Cut back on the military? Infrastructure? Eliminate the IRS and the EPA? Squeeze Medicaid once again? Cut taxes?? Who can take the Republicans seriously if they won’t do anything but whine and fear monger ?

    • Richards onto the truth.. The GOP and those who are in their realm philosophically including Jim – have no solutions for the tough issues and refuse to show leadership nor compromise in trying to find them.

      they do 40+ REPEALS and not one REPLACE and seem shocked that the POTUS will not roll over and will use the veto. Someone forgot to tell them that a real “mandate” IS a veto-proof majority!

  4. “College kids are drunk and promiscuous.”
    Huh?
    How does that serious issue fit into this discussion?

  5. Sorry JAB, but I MUST disagree with your article. Despite the Republicans’ obsession with NO, and even their refusal to take Yes for an answer several times, the economy has indeed recovered. And the recovery has happened WITHOUT A SINGLE REPUBLICAN VOTE!

    I also recall that the Republicans in 2012 were promising gas prices around $2.50 and unemployment rate of 6%, by the end of 2016. We have exceeded both of their predictions, and ahead of schedule.

    Oh, all that despite the ‘disaster’ of providing health coverage for an additional 10 million (excluding those who gained it before last year). And to add insult to jury, the health care cost curve has already began to flatten! Truly ‘armageddon’ must be near, I suppose.

    It is obvious, just as it was after Clinton raised taxes in 1993 and the economy actually prospered, that Republicans/Conservatives actually are thoroughly inept in economic matters. (I still remember the state of the economy under Bush).

    PS: have few complaints about the foreign policy too.

    • well – they blame the economy, unemployment, stagnant wages, the deficit and debt and bad breath and body odor on the POTUS – and last I checked – the POTUS really can’t do much about these things – only Congress can.

      On Foreign Policy -he’s taking a beating but, in my view, he’s reached the point where he knows that we cannot send US forces to other countries to track down terrorists – without adversely impacting the other people who live there and see us as invaders and when we kill members of their family in our fights – and send others to Gitmo – they turn against us.

      The Middle East is an enormous mess of failed states and ruthless strongmen but so is a lot of Africa as well as some of the “stans” and we simply cannot project force in the way we want to.

      It’s a tricky dance than many in America have no tolerance for but I shudder to think if we get another guy like Bush in office who gets back into “nation-building” mode.

      we have thousands of dead young men and hundreds of thousands of young people who have been sliced and diced – damaged for life – and our financial and moral responsibility.. Sending our young off as cannon fodder is dumb.

  6. I have not read your book, so should not comment on your larger argument. But I would say two things about what you have here.

    First I would challenge your claim that slower health care cost inflation ” has absolutely nothing to do with Obamacare.” To be sure, the cost curve began to bend before implementation of the ACA due to economic factors – the cost of everything deflates during serious recessions. But the ACA has probably helped keep these costs down, mainly through changes in Medicare. Getting more people insured probably also helped, if only because it makes preventive care more available thereby avoiding higher-cost reactive treatments.

    More critically for the larger argument I suspect you make in your book, I would also challenge both a claim that Social Security is going bankrupt and an assertion that the American system faces some sort of fiscal collapse.

    Social Security simply cannot go bankrupt. We could of course decide to reduce benefits or end the program altogether. But the system cannot collapse under its own weight. John T. Harvey lays out why in Forbes Magazine: Social Security Cannot Go Bankrupt. See also Ivan Moscovitz’ article in the The Motley Fool: Five Myths About Social Security.

    Possible changes needed to ensure a minimum retirement income for all our retirees include gradually raising the retirement age, means testing, requiring workers at my income level to pay safety net taxes on my entire income, levying SS taxes on non-labor income, and even raising the minimum wage. The objective facts are that relatively minor tweaks — not “dramatic corrective action” — to both Social Security and Medicare keep both programs running at current benefit levels.

    I would also challenge your doomsaying with respect to the US Government’s fiscal situation. The truth is that the United States is a very wealthy country. As of September 2013, the US households and non-profits held about $88 trillion in assets. Nonfinancial businesses hold another $38 trillion and the financial sector another $74 trillion. Add in a few smaller holdings and the US assets total about $225 trillion. And we’re adding to that total at a rate of about $16 trillion annually, with this GDP rising.

    All of this means that a simple one-time 10% tax on assets would pay off the entire national debt at a single stroke…with enough left over to pre-pay all US government spending for a year.

    I should perhaps read your book so I can understand your larger argument. But if the general outline is that America is broke and won’t be able to afford a safety net for Boomer retirees it falls apart pretty quickly. The United States is not broke even if our wealthiest citizens object to funding the requirements it places on Federal and state governments (e.g., national defense). I would suggest that before they permit the system to collapse they’ll suck it up and pitch in.

    • I think the irony is rich in that the GOP did not do one single thing to help the economy recover – not things they had always done in the past – like spending on infrastructure.

      and so they whine about how they can’t get the POTUS to sign 40 repeals of ObamaCare or other just totally ignorant ideas.

      so – yeah – the POTUS should be claiming a little success and the GOP should be ashamed but the brazen hussies they are – no way.

      Their idea of “governance” is a lot like vandals destroying whatever they can and complaining that the POTUS is not appreciative of their efforts.

      • “The irony is rich in that the GOP did not do one single thing to help the economy recover.”

        That’s priceless, Larry! If you want the economy to recover, the first rule is…. put the politicians in straight jackets to stop them from trying to fix it! The economy has always rebounded on its own — and that includes the Great Depression — unless the politicians muck it up.

        It is no coincidence that the most activist president since FDR has had the weakest economic recovery since…. FDR.

    • R.S.S., sorry it took so long to respond. A couple of points:

      First, I’m well aware that Social Security can’t “go bankrupt.” The risk is that by the year 2030 the trust funds will run dry, which means the program cannot pay out more money than it is taking in from payroll taxes. Payroll taxes will cover an estimated 75% of expenditures. Therefore, without a rescue, Social Security will have to reduce its payments by 25%. That will cause a political crisis — and, given the critical importance of Social Security by then in propping up overall consumer spending, an economic crisis as well.

      Second, you say that Obamacare has helped contain health care spending. Could you offer some specifics on exactly how? The one thing we know for certain that Obamacare has done is to provide health coverage to several million people. More people = more spending. Obamacare did propose some ideas like Accountable Care Organizations (ACOs) to better manage health care populations, but I’m not aware that ACOs have been implemented on a large scale or even that they have been implemented successfully.

      The other thing we do know is that private companies have been curtailing their medical insurance expenses by shifting more of the cost to their employees. Paying for a larger share of the cost out of their own pockets, employees are either foregoing or delaying medical care, or shopping for lower cost providers.

      But I’m open to changing my mind if someone presents solid evidence. Perhaps someone could compare Medicare spending, Medicaid spending and private-sector spending to see which sector has shown the greatest restraint in growth.

      • re: in 15 years, SS will “only” be able to pay 75% of benefits.

        What might be useful in this conversation about SS – is to ask why we’ve had a “surplus” in the trust fund since the time of Ronald Reagan.

        the reason why is because under Ronald Reagan – it was recognized that changing boomer demographics would affect SS and so a reserve fund was built up to provide a transition period for changes to be gradually phased in to SS and that time is now.

        In other words – things are working according to plan. We have 15 years to make adjustments to SS to keep it paying out at 100%.

        What’s not good is all the verbiage from the doom and gloom folks about how it is “going broke” .. because it’s totally misleading and really totally not correct.

        And yet that premise is included in the deficit/debt, “the sky is falling” blather than makes the rounds these days and …

        really – it’s no more relevant nor honest that claiming the debt/deficit under a particular POTUS is due to that POTUS “policies” because anyone with a honest mind will admit that it’s Congress, not the POTUS that determines spending.

      • re: ” Second, you say that Obamacare has helped contain health care spending. Could you offer some specifics on exactly how? The one thing we know for certain that Obamacare has done is to provide health coverage to several million people. More people = more spending. Obamacare did propose some ideas like Accountable Care Organizations (ACOs) to better manage health care populations, but I’m not aware that ACOs have been implemented on a large scale or even that they have been implemented successfully.”

        people who have insurance, visit Primary Care doctors on a routine basis where disease is detected and treated instead of letting it go until it needs
        massive charity care at the hospital.

        this is a no-brainer but the bigger problem is that the opposition not only has no alternative plan – that non-plan also does not address costs.

        you can beat something with nothing and that defines the opposition.

        we know what they don’t like but 4 years after the ACA was made law – they still have nothing else to say about “other” much less “better”.

        • “People who have insurance, visit Primary Care doctors on a routine basis where disease is detected and treated instead of letting it go until it needs massive charity care at the hospital. This is a no-brainer.”

          No, it’s not a no-brainer. It’s a hypothesis. An Oregon study showed that “indigent” patients who went onto Medicaid actually suffered worse health outcomes than before. Maybe that was a fluke, maybe it wasn’t. But the truth is, some preventive measures have a net positive benefit, some don’t. Remember the flap over annual breast cancer exams?

          We need to see facts, Larry. As a partisan of the “fact-based” party, you should gravitate naturally to that point of view. But somehow, you seem to have made up your mind about a lot of things without the need for any facts at all!

          • you’re talking about ERs as if that’s the only charity care that hospitals deliver.

            what happens when someone shows up with an advanced disease at the ER?

            do you think they turn around and go home or do you think they are admitted and then receive significant expensive – reactive treatment.

            and you are confirming your bias but NOT looking at OTHER studies like this:

            Spike in ER use after Medicaid expansion is only temporary, study says

            http://www.scpr.org/news/2014/10/15/47400/study-spike-in-er-use-after-medicaid-expansion-is/

            the point here is – you’re not waiting to see the overall impact – over some time -you’re hopping on the short-term studies to confirm your bias.

            use your head Jim Bacon.

            do you really think ER rates are the ONLY expensive care that hospitals provide to people who don’t have primary care.

            and are you seriously going to draw a conclusion – months into a new law?

            if you were around when Medicare was first created – you’d be in the group that swore up and down it would never work!

            Finally – where is your alternative that will prove ahead of time that it will work?

            you have none. you have no real alternatives much less ones that are proven to work – right away , much less ever.

            you can’t be a legitimate opponent when this is how you operate – it’s pure ideology.

            the GOP supported the individual mandate as an alternative to Hillary-Care – do you remember that?

            Now tell me what the GOP has produced since that time to deal with this problem. That was more than 20 years ago and what the side you have aligned yourself with – produced?

          • here’s another study Jim:

            IMPACT OF INSURANCE EXPANSION ONHOSPITAL UNCOMPENSATED CARE COSTS IN 2014

            Key Takeaways:
            ✓ Early hospital financial reporting and member surveys from hospital associations indicate that, through second quarter 2014, payor mix is shifting in ways that will likely reduce hospital uncompensated care costs. In particular:
            ➢ Volumes of uninsured/self-pay admissions (which comprise a major portion of uncompensated care provided by hospitals) have fallen substantially, particularly in “Medicaid expansion” states (states that have elected to expand the Medicaid program through the Affordable Care Act);
            ➢ Volumes of uninsured/self-pay emergency department visits have fallen substantially, primarily in Medicaid expansion states; and
            ➢ The volume of hospital admissions for patients covered by Medicaid has increased, but only in Medicaid expansion states.

            http://aspe.hhs.gov/health/reports/2014/uncompensatedcare/ib_uncompensatedcare.pdf

            my question to you – why do you ONLY rely on ONE study and not seek a wider view ?

            that’s called confirming your own bias, guy.

            but even if you were right – how would you seriously and honestly conclude something with such a short period of time on something that has taken decades to evolve to?

            when you oppose something like you’re doing with a closed mind and not willing to see other studies nor give a significant change time to work – and you have no alternatives – you’re acting like an ideologue …

            it’s time for you guys to do something besides chew your cud.

          • Congratulations, according to the study you cited, Obamacare will save $5.7 billion in hospital uncompensated care cost — and could save even more in the future! That’s out of more than $2.5 TRILLION in healthcare spending. That’s about two-tenths of one percent of healthcare spending — not enough to account for much of the spending slowdown.

            Moreover, the study doesn’t answer how much it cost in additional Obamacare spending to achieve that savings. What are the *net* savings? The study doesn’t answer that question.

            The report is a political document. If it were a *conservative* political document, that would be sufficient for you to dismiss it out of hand as of no value whatsoever. But I don’t do that. I consider it as one data point among many.

          • there are more studies Jim.

            why are you content to not avail yourself of the literature that is out there
            and continue to narrow your reading to those that satisfy your biases
            and continue to look at what you don’t know now and in the future as proof
            of non-performance?

            if you actually had an alternative plan with some studies to show it also had promise -you’d have a defensible principled position.

            but you don’t and yet you continue your dark-side only perspective.

            you say political document – it’s fact-based guy – not the kind of stuff you see from the think tanks that specialize in propaganda, disinformation and misinformation.

            here’s yet another study:

            Impact of Medicaid Expansion on Hospital Volumes

            http://www.cha.com/Documents/Press-Releases/CHA-Medicaid-Expansion-Study-June-2014.aspx

            is it going to be that anything that does not confirm your bias is “political”?

            again – if you had an alternative -you’d have a principled position – an affirmative choice.

            but you don’t. you have nothing – but opposition and a refusal to look at
            ALL the reports.. or call them “political”

            where is your balanced commentary guy?

  7. “The other thing we do know is that private companies have been curtailing their medical insurance expenses by shifting more of the cost to their employees. Paying for a larger share of the cost out of their own pockets, employees are either foregoing or delaying medical care, or shopping for lower cost providers.”

    what does the above have to do with ObamaCare – and the deficit/debt gloom and doom – “the sky is falling” narrative?

    “But I’m open to changing my mind if someone presents solid evidence. Perhaps someone could compare Medicare spending, Medicaid spending and private-sector spending to see which sector has shown the greatest restraint in growth.”

    No one EVER presents SOLID EVIDENCE – beforehand and if that was a serious standard – we’d just not even attempt reforms, just stay frozen in the status quo.

    Medicare, by the way, is the gold standard benchmark for private insurance reimbursements rates. and it’s that way because 40 million people over 65 are insured and provided health care for much, much LESS than the private sector does it.

    and they do it even though they provide it to people for 105.00 a month who make 85K a year in income.

    but if you put your “show me the proof” standard on Medicare – we’d never have it… so your “standard” is not really a standard – it’s an excuse to knock down anything the govt would propose to reform the existing health care system.

    you can’t have it both ways.

  8. Sir,

    Whether or not the “trust funds” will run dry depends on the strength of the economy in the first instance, and adjustments made in the second. But the law on this mandates specific benefit levels for recipients. The US Government must make these payments. In the event these payments cannot be made from “trust funds,” Congress will either have to fund these payments or reduce them. This will not come as a surprise to no one, and I don’t think we have any reason to think we won’t find a political solution to this. We have increased payroll taxes in the past in order to fund these trust funds in the first place, and we’ll make the necessary adjustments at the margins to keep the system working without reducing benefits. This will require higher taxes on someone, or adjustments to benefits at the margins and this discussion has begun: raise payroll taxes, or levy them on a broader income base (e.g, capital gains or higher labor income levels) or gradually reduce benefits by raising the retirement age, keying the retirement age to type of work, or means testing.

    I frankly don’t understand why you think this will cause a “political crisis,” since Americans have been working on this problem for decades and the American economy can clearly absorb the costs. It seems to me that you begin with a false premise — that the United States is in some way “broke.” Again, this simply does not fit the facts. We live in a very wealthy country and we can quite literally pay for almost anything we want to do – if the very wealthy agree to contribute. And we far more productive than most other countries, so we’re constantly adding to our national wealth.

    Unfortunately we rely too much on markets to allocate resources, and the invisible hand turns out to have some issues doing this effectively in some areas (see Kuttner’s Everything for Sale for insight on this). As growing wealth inequality — caused by inefficient resource allocation to people who move money rather than make things — exposes market failures, I predict growing support for expanding the tax base beyond labor income to financial services income. The very wealthy will decide they prefer social stability to a fifth billion dollars.

    It’s a bit early to have good enough data to say just how the ACA has reduced health care spending, and definitions matter. You suggest one way: employers change plans to shift costs to workers, who then shop around for less expensive care. If you think ACA caused this, and you think markets can more efficiently allocate health care resources, I’m wondering why you think this is bad.

    It’s not clear that “More people = more spending.” People who need medical care will get it, whether or not they have insurance policies. To be sure, many will put it off if they must pay out of pocket at the point of sale, but this may actually increase costs in the long run. If I need stints because I couldn’t pay $30 a month for statin drugs, or put off buying them as a consumer choice, then the market hasn’t reduced costs where universal insurance would have. This, by the way, is the problem with health care markets – consumers cannot shop for price and quality for a life-or-death product.

    In any event, preliminary information suggests that the ACA has begun to limit the growth in health care spending. See this Bloomberg article: Obamacare Effect Linked to Lower Medical Cost Estimates

    I picked up a copy of your book and I’m wading through it. I’d hoped the first chapter would lay out your thesis in a coherent way, but I found myself disappointed. Rather than a clear exposition of why you think we have a problem and how you would support your claim I found a list of reasons why American government doesn’t work because it’s been captured by various special interests. And so far I notice no particular expertise beyond what I might achieve with effective use of Google.

    But I’m not finished reading, so I should reserve judgement, and will.

    RSS

    • I always appreciate the views of R. Stanton Scott as they often provoke more thought…

      Social Security will not cause boomergeddon and neither will Medicare Part A or even SSDisability – all 3 which are components of FICA that most folks pay into duriung their work careers.

      Medicare Part B and Medicare Advantage are not paid for with FICA but General Revenues – and WILL – if nothing is done about costs – WILL result in a BOOMERGEDDON type DISASTER – and it’s not because they are entitlements per se – it’s about demographics where the retired pool of people is getting larger than the working pool of people and it’s just not sustainable in it’s current form unless we allow a lot more immigrants into the country to work and pay taxes including FICA or we adjust retirement age and/or benefits.

      But it won’t be the end of the civilized world – as we know it – if we do nothing about Social Security and benefits reduce automatically by 25% but still pay off at 75% for another 75 years.

      Heck – if we had actually designed Medicare (Part B and Advantage) to work that way – there would be no boomergeddon! Benefits would automatically adjust downward as the pool of people got larger – and yes.. some folks would not get
      their cataracts or bum hips fixed as fast as done now but that’s a far stretch from living on the street blind in a wheelchair.. which is the frequent disastrous vision of the future we are regaled with if we don’t repent our entitlement sins.

      The bigger problem that we have is that most of the population does not understand the basic facts with Social Security and Medicare.

      Even folks who writes blogs, report the news, and even write articles and “studies” for think tanks – have not taken the time to truly research and understand the facts – and when you don’t understand the facts – your “solutions” tend to be bizarre disconnects to the realities.

      Social Security can be “fixed” quite easily if we just recognize that the purpose of Social Security is fundamentally INSURANCE and not Pension. It’s insurance because it was designed from the get go to pay for your needs in retirement IF you DID live longer than expected and had no other savings! So the age of becoming eligible for SS originally was the window between ceasing to work – and death and as life expectancy has increased that window has increased.

      long story short – SS retirement age needs to get older – not a huge amount just a few years and the SS “trust fund go broke” problem just totally goes away.

      but again – no matter what happens to social security – it is explicitly designed to automatically reduce benefits to be no more than FICA can bring in – and it’s UNLIKE every other program in govt – INCLUDING Medicare which do the exact opposite.. they go up automatically unless Congress actually reaches agreement and intervenes and changes the program.

      Even Medicare can be “fixed” if ordinary people recognize that an insurance program for the elderly that provides them with unlimited benefits at the rate of 80% (with a 20% co-pay) – cannot sustain itself if you sell it to seniors at the price of $105.00 a month.

      It gets even worse if you provide additional insurance (called Medicare Advantage) at almost no increase in premiums for most – to cover virtually all (100%) of their expenses – uncapped lifetime . If you want to bankrupt the country – this is the way to do it.

      We have married seniors who are making more than 100,000 a year in retirement income that are paying $210.00 a month for Medical Insurance!

      These are the unvarnished facts – that very few folks – even those getting these benefits – really know – and that extends to many elected politicians who get up an blather on about how entitlements are killing us – and they have no idea HOW they are so their “solutions” have no relevance to reality because their solutions are to do away with Medicare all-together because it’s an “entitlement”. They extend that judgement to MedicAid and even Social Security – a tour-de-force of ignorance!

      As a country – we are NEVER going to send seniors to live in cardboard boxes next to trash dumps or let them die as indigents on the steps of hospitals.

      The argument is how to provide an acceptable standard of living and medical care – cost effectively – and by requiring people to pay into their own ultimate needs via individual mandates – which is what FICA is.

      If FICA had included besides Medicare Part A – Medicare Part B – we’d not even be talking about boomergeddon at all!

      yes.. we’d still have the automatic reductions to 75% if we do nothing about it – but costs would be prepaid like they are now with social security – and there would be no ticking budget time bomb in the general fund.

      so – the long and short of this whole discussion is that many folks do not know the basic facts to start with – and thus when they advocate solutions – those solutions have nothing to do with realities -neither coming from the left nor the right although the right does tend to live in LA LA LAND when it comes to what they would do about entitlements – i.e. just do away with them!

      People – most people LIKE the idea that they will have SOME social security income – as a safety net. They may not like paying FICA when they are young but make no mistake – when they get to 65 – they are anxiously awaiting to find out what their monthly social security check is going to be.

      there are many, many people over 65 in this country – who rely solely on a monthly SS check that often is less than 1000.00 to pay for their total monthly expenses! Those folks exists on the margins and the only reason they are not getting welfare and MedicAid – is their Social Security check.

      If you truly had two candidates and one said he/she would preserve and protect Social Security and Medicare and the other one guaranteed they would get rid of both programs – how would that turn out?

      and yet – that is the basic position of the right – but disguised by pointing to the “failure” of SS and Medicare – .. they assign the blame but they never truly come out and honestly say what their plan is – instead.

      It’s EASY to find flaws with any program. If the critics of Medicare used that same criteria for spending on any other govt function – including the Military – what would be their “solution”? To shut down the military because it is going “bankrupt” and is “unsustainable”… corrupt, wasteful, etc, etc?

      apparently that kind of thing is OKAY with the military – transportation projects, higher ed subsidies, CIA, NSA, etc. but not with Social Security and Medicare which must be wiped from the face of the earth because of their failings.

    • I daresay that you’ll disagree with most of my arguments presented in “Boomergeddon,” but I’ll give you credit for this: At least you’re reading it in order to critique what I actually say rather than critique what you think I might say. Not everyone does me that courtesy.

      • I do try – but I will admit to being verbose and at times hard edged!

        Fundamentally I believe we must have individual mandates because even though we say we won’t pay entitlements to those who don’t plan – we do.

        we don’t let old people die living in shacks without medical care – that’s just a plain fact.

        so the issue (for me) goes back to what’s a cost effective way to deal with it and should we require people to pre-pay some of their old age expenses.

        I do NOT believe in the stereotypical welfare state! I believe people SHOULD be responsible but unfortunately if you let people decide what they’d pay for or not – we’d not have things like public schools and police and fire/ems…

        so if we impose taxes on people for services they use – what is the problem with following that same convention for services they will need later when they retire?

        we force people to pay for a military or EPA they don’t agree with but we can’t do that with SS and Medicare?

        What the… where is the logic in that?

    • As you’ll read in “Boomergeddon,” I argue that Social Security is one of the most easily solved parts of our fiscal dilemma. As you observed, we can put the program on a self-sustaining course by making small adjustments that have a large cumulative effect over a long period of time. Unfortunately, we have lost the last four years to inaction. And the longer we wait, the bigger those “small” adjustments will have to be. Right now, as I’ve blogged before, it looks like we’re preparing to kick the can down the road by rolling the Disability Insurance trust fund into the Old Age & Survivors trust fund, accelerating the emptying of the OASI trust fund to 2030. Basically, that means we now have 15 years to fix the problem. There will be blood.

      • I’d be strongly opposed to having the SSD sucking on SS itself.

        I think we need to live within our means on SSD – make benefits harder to get and make them stingier and in general stay within the fiscal lanes.

        in terms of kicking the can down the road – that’s not unique to SS and Medicare – it’s endemic to the whole budget.

        We spend more on “defense” that the next 10 countries combined and more than 1/2 our budget is on “defense” and yet we can’t cut any?

        and please don’t forget – when we say “defense” – we are talking about 75% of it being salaries and benefits – not hardware.

        and I’m not talking about guys carrying guns in platoons – I’m talking about guys putting paint on ships in Hampton and designing drones in NoVa and all of those guys not only get salaries, they get health care, they get pensions – not for a few years – for their entire lives – to include Medicare also.

        I cannot begin to tell you how many folks I know who get Medicare who have several hundred thousands dollars in assets between their two houses and 3 vehicles and other stuff – and yet those folks pay 105.00 a month for Medicare and have had cataracts in both eyes fixed as well as have their hips and other body parts replaced.

        both “defense” and “entitlements” can and should be scaled back – without totally killing either.

        Boomergeddon is not an inevitable disaster – it’s a story about ignorance and denial.

      • there’s a little known aspect of Social Security Disability that is driving the numbers:

        “Disability Planner: Medicare Coverage If You’re Disabled

        We automatically enroll you in Medicare after you get disability benefits for two years. The two parts of Medicare we enroll you in are hospital insurance and medical insurance.

        Hospital insurance (Part A) helps pay for inpatient hospital bills and some follow-up care. The taxes you paid while you were working financed this coverage, so it is free.

        Medical insurance (Part B) helps pay doctors’ bills, outpatient hospital care and other medical services. You will need to pay a monthly premium for this coverage if you want it.”

        http://www.ssa.gov/dibplan/dapproval4.htm

        In other words – if you are 40, 50, 60 and you don’t have a job or a job with medical insurance, – you can get Medicare if you are “disabled”.

        how many people in that age group – at wits end with chronic diseases and no health insurance – take the easy SSD path to get it?

        Will ObamaCare dent this by providing a different path to insurance?

Leave a Reply