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|IT'S PAYDAY; GOT YOUR WHEELBARROW?
It’s human nature. The doctor tells us our symptoms are more serious than we thought, that the repercussions could be catastrophic if we don’t make drastic changes in our diet, lifestyle, and exercise regimen immediately.
But we find some pills that make us feel better, and quickly convince ourselves it was nothing. Yeah, that diet and exercise thing sounds great, alright. Maybe next week.
The Pension Benefit Guaranty Corp., the federal agency that insures the private pensions of 44 million workers, reported Nov. 15 that its 2005 deficit will total $22.8 billion.
“Billion,” with a “b.”
Deficit, as in shortfall. Not enough to cover its obligations.
And the baby Boomers haven’t yet started to retire.
It’s like looking over the edge of the bridge and noticing there are huge holes in the safety nets spread down there. Does it matter, really? We weren’t planning on jumping.
Also this week, David Walker, the comptroller general of the United States, held a breakfast meeting with reporters in Washington.
“We face a demographic tsunami ... that will never recede,” Mr. Walker said, noting that the Medicare and Social Security benefits promised the retiring baby Boom generation will swamp the federal budget in coming decades.
The nation’s top auditor likened the condition of the United States to Rome before the fall of the empire. Its financial condition is “worse than advertised.” It has a “broken business model.”
Without major spending cuts (it’s traditional to add “or tax hikes,” though of course tax hikes cripple production and make things worse), the national debt will grow more than $3 trillion through 2010, to $11.2 trillion -- nearly $38,000 for every man, woman and child. The interest alone would cost $561 billion in 2010, the same as the current Defense budget.
Kent Conrad, Democratic senator from North Dakota, tells USA Today the nation’s $7.9 trillion debt is now rising by about $600 billion a year. This, he notes, before the baby boom retires. “We’re not preparing for what we all know is to come,” he says. “We’re all sleepwalking through this period.”
Stuart Butler of the Heritage Foundation warns Medicare, Medicaid and Social Security spending will soar over the next 45 years. To avoid big tax increases, the government will have to “renegotiate” the social contracts it made with beneficiaries, he warns.
The number of people covered by Social Security is expected to grow from 47 million today to 69 million by 2020. Baby boomers begin to reach age 65 in 2011 and go on Medicare. USA Today reports that if Medicare grows a mere 1 percent faster than the economy -- a conservative estimate -- it would cost $2.6 trillion in 2050, after adjusting for inflation. That’s the size of today’s entire federal budget today.
What’s being done?
Up until a few weeks ago, congressional Republicans were hoping to “cut” a paltry $50 billion from this year’s budget. Of course, this employs the word “cut” in a way unknown outside Washington, D.C. What was actually proposed was merely that the rate of growth of some programs be trimmed from 7.5 percent a year to 6.5 percent a year.
But there’s no need to worry about that, any longer. Harry Reid and his jug band responded by getting out the washboard and the fiddle and starting to play the first few bars of “Old People Gonna Starve,” whereupon the Republicans broke camp and ran for the hills like Ichabod Crane trying to outrun the pumpkin.
The central government now spends $20,000 per American household. Total tax extractions are at 43 percent of our earnings. The government now consumes 43 percent of the Gross Domestic Product, as opposed to 22 percent in 1947. Soon, its largest single spending category will be “interest.”
Yet anyone who warns collapse may come within 25 years -- sooner, if there are unforeseen crises (as there always are) -- is easily mocked as a loonie in a treehouse, foolishly stockpiling ammo and MREs while everyone else gets rich flipping real estate.
Diet? Weight loss? Gee, we were planning on putting steak and potatoes and a nice dessert of Bananas Foster on the credit card this evening. Maybe tomorrow.