Free Markets, Free People

Your Sunday Morning Wakeup

Bruce Bartlett gives you a different way of looking at the mess your political leaders, over a number of generations, have gotten us into and what it will cost, at a minimum, to fulfill the promises they’ve made over the decades.

To summarize, we see that taxpayers are on the hook for Social Security and Medicare by these amounts: Social Security, 1.3% of GDP; Medicare part A, 2.8% of GDP; Medicare part B, 2.8% of GDP; and Medicare part D, 1.2% of GDP. This adds up to 8.1% of GDP. Thus federal income taxes for every taxpayer would have to rise by roughly 81% to pay all of the benefits promised by these programs under current law over and above the payroll tax.

Since many taxpayers have just paid their income taxes for 2008 they may have their federal returns close at hand. They all should look up the total amount they paid and multiply that figure by 1.81 to find out what they should be paying right now to finance Social Security and Medicare.

To put it another way, the total unfunded indebtedness of Social Security and Medicare comes to $106.4 trillion. That is how much larger the nation’s capital stock would have to be today, all of it owned by the Social Security and Medicare trust funds, to generate enough income to pay all the benefits that have been promised over and above future payroll taxes. But the nation’s total private net worth is only $51.5 trillion, according to the Federal Reserve. In effect, we have promised the elderly benefits equal to more than twice the nation’s total wealth on top of the payroll tax.

We again have a new crop of political leaders making similar promises about a range of things, from energy to the environment to health care. Look at what they’ve done with the portion of health care they were given previously?

Someone – anyone – tell me how, given the performance of government to this point with Medicare and Medicaid, it is going to provide lower cost health care when it is obvious that it has been instrumental in doing just the opposite?

For some reason, I just can’t get past that negative and inconvenient truth enough to suspend disbelief and decide that once government is running the whole show, everything will fall in line and we’ll have world-class health care at a much lower price – all managed by government.

And one other point Bartlett makes – this mess was made by politicians and, as our laws are written, can only be fixed by politicians. But politicians rarely, if ever like to make decisions which will be unpopular and cause them to have to find new employment. No one likes to be the bad guy. So don’t expect much in the way of “fixing” this mess. You’re more likely to see the whole house of cards collapse because it is unsustainable and the administration in charge at the time blame the previous one (kind of like what you’re seeing now on just about everything else) than to see any political leader actually make the hard decisions necessary (and then win over the Congress) to actually take care of these looming problems.

Enjoy your Sunday.

~McQ

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8 Responses to Your Sunday Morning Wakeup

  • All the above is true.  But I would add the American voter to the list of problems.  Like it or not, a majority of the voters willingly put these idiots back in office, or elect new idiots (e.g. Al Franken).  Not sure if it is voter stupidity, demographics, or welfare mentality drilled into peoples heads over the decades.  Probably all three.  Given the number of voters on the government payroll – from working directly for the government, having contracts dependent on the government, or getting welfare from the government – I do not see the trend reversing, only accelerating.

  • <i>This</i> is what I get to wake up to?

    Screw this.  I’m going back to bed…

  • We’re also in hock to the tune of about $40 trillion for Federal, state and local employee retirement plans -  plans that are Club Med quality compared to our simple SS and 401K’s.

    And the governmental unions are throwing untold gallons of gasoline onto the fire.
    http://online.wsj.com/article/SB124227027965718333.html

  • The scariest part is that, even if/when the dam finally bursts, our politicians may continue to try and pull us in the wrong direction instead of trying to fix the problem.  Because even after things go catastrophically bad, it may still be politically “safer” to lie to the public than to try to guide us through a painful economic recovery.  Forcing us to take our medicine will be unforgivable to much of the electorate.  Making things worse and calling it a “recovery?”  That might just get you re-elected.

    • “The scariest part is that, even if/when the dam finally bursts, our politicians may continue to try and pull us in the wrong direction instead of trying to fix the problem.  Because even after things go catastrophically bad, it may still be politically “safer” to lie to the public than to try to guide us through a painful economic recovery.  Forcing us to take our medicine will be unforgivable to much of the electorate.  Making things worse and calling it a “recovery?”  That will get you re-elected.”

      Fixed

  • FDR imposed “The New Deal”; LBJ, “The Great Society.”  JFK presided over “Camelot.” What should Americans call BHO’s vision?  The Great Swindle? The Bad Deal?  Goodfellas?

    “The New Depression.”

  • “What should Americans call BHO’s vision?”

    The answer is, “Hope for change.”  Of course, it is change for the worse. 

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