One of the major issues of the day is the complete lack of fiscal responsibility. This is unfortunately a bipartisan failure because when Republicans were in power, they did little to shore up the finances of the country.  Republicans talked a good game of entitlement reform, but always turned back from what some call “the third rail of domestic politics.”

As a result of this joint culpability, it just does not seem to draw the political fire it used to. That is a shame because where we are headed is truly alarming.

That may be changing as a new report indicates the major entitlement programs are hurtling towards insolvency faster than expected.

To be sure, the Democrats are on a level of irresponsibility that boggles the mind. They are launching huge new programs when it is well known that Social Security and Medicare are both headed for insolvency.

Democrats are pushing $3.5 trillion in new spending as it becomes clear the pensions and medical care of the elderly are in peril.

A quick summary from the bipartisan Committee for A Responsible Federal Budget:

Today, the Social Security and Medicare Trustees released their annual reports on the long-term financial state of the Social Security and Medicare programs. Today’s reports are the first to incorporate the effects of the COVID-19 pandemic, recession, response, and anticipated recovery.

The latest Social Security projections show the program is quickly headed toward insolvency and highlight the need for trust fund solutions sooner rather than later. The Social Security Trustees found:

• Social Security is Only 13 Years from Insolvency. Social Security cannot guarantee full benefits to current retirees under current law. The Trustees project the Social Security Old-Age and Survivors Insurance (OASI) trust fund will deplete its reserves by 2033 and the Social Security Disability Insurance (SSDI) trust fund will become insolvent by 2057. The theoretical combined trust funds will exhaust their reserves by 2034, when today’s 54-year-olds reach the full retirement age and today’s youngest retirees turn 75. Upon insolvency, all beneficiaries will face a 22 percent across-the-board benefit cut.
• Social Security Faces Large and Rising Imbalances. According to the Trustees, Social Security will run cash deficits of $2.4 trillion over the next decade, the equivalent of 2.3 percent of taxable payroll or 0.8 percent of Gross Domestic Product (GDP). Annual deficits will grow to nearly 5.0 percent of payroll (1.7 percent of GDP) by 2080 and total over 4.3 percent of payroll (1.4 percent of GDP) by 2095. Social Security’s 75-year actuarial imbalance totals 3.54 percent of taxable payroll, which is 1.2 percent of GDP or nearly $21 trillion in present value terms.
• Social Security’s Finances Are Deteriorating. Social Security’s finances have worsened over the last year – insolvency is projected to occur a year earlier, and the 75-year actuarial deficit is over 10 percent larger. The 75-year shortfall is nearly 85 percent larger than it was projected to be in 2010.
• Time is Running Out to Save Social Security. Lawmakers have only a few years left to restore solvency to the program, and the longer they wait, the larger and more costly the necessary adjustments will be. Acting now allows more policy options, lets policymakers phase in changes more gradually, and provides more time for workers to adjust their work and savings if necessary.

Medicare is in even worse shape and could run out of funds in just five years.  

Note how steep spending must rise until about 2038.

  

Yet the knowledge of these shortfalls has been known for years and has accelerated by not only Covid but demographic trends.

Demographics are like gravity. You are in peril if you ignore it. Our population is aging rapidly and families are not having children. Social Security and Medicare both were set up as Ponzi schemes, that is the first participants are funded by supposedly more later participants. Only now, the number of new payees into the system is shrinking fast, rather than growing.

In a fully funded pension system, this is not that much of a problem.  But in a pay as you go system that we have, today’s workers are not funding their own benefits, they are funding their parents and grandparents.  The nub of the problem is the number of elderly is expanding due to the aging of the Baby Boom, and the population coming up from behind is much smaller.  You simply can’t BS your way out of the compelling math.

It is also just a fact of life, that most medical expenses occur in the last years of life, so it stands to reason that an elderly population will spend an increasing amount on medical care.

In simple terms, you have more money flowing out than flowing in, cash flow goes negative and assets in the fictitious “trust funds” must be liquidated and then you reach insolvency.

We say fictitious because the “trust funds” were never really invested, they were put into government bonds, which themselves are just a promise to pay based on the governments ability to tax, print, and borrow.

And we would add, since the geniuses at the FED started their policy of zero interest rates, the return on the “assets”held by the “trust funds” have been earning a pitiful, albeit negative rate of return.

Modern Monetary Theory advocates that dominate the Democratic Party say as long as government can print money, no default can occur. That is true in the narrow sense. What they fail to mention is massive printing schemes depreciate the value of money, hence inflation. So what you really get is a default of sorts in the value of money, but the bonds paid off in confetti stay technically solvent.

So that is where we are headed. To pay for the shortfall in Social Security and Medicare, we have less money because more is being directed into new spending like ObamaCare and all the new Covid related spending, and now massive new programs to reshape America along Socialist lines.

To be fair, shoring up these programs was always going to be expensive. What is truly remarkable, and irresponsible, is Congress has known this and has answered the problem by making it much worse.  They have launched brand new very expensive programs knowing full well this problem was festereing.

Progressive Democrats act as if there is no limit on how much can be spent or borrowed on new programs and have done nothing to shore up existing programs known to be in severe financial peril.  It has been a giant “screw you we’ve got elections to win” to both the elderly and the young that will be greatly impacted by this impending debacle.

There are only four possible solutions: print money and inflate the currency, borrow even more and drive interest rates higher in a debt bubble,  raise taxes to much higher levels or severely cut benefits. However, the spending now is so off the charts, it is likely no combination of the four can be finessed without doing damage to something.

Printing money creates inflation. Borrowing crowds out the private sector and can force interest rates higher, making the existing debt bubble unstable. Raising taxes takes money out of people’s hands so they have less for their own support thus hurting the economy. Cutting benefits will hurt those elderly who depend on these programs and it catches them at a stage in life where there is little they can do for themselves.

It is difficult to imagine a more irresponsible and immoral policy, than to get people dependent on a government program, and then pull the rug out from under them when they are too old and enfeebled to do much about it.

What is so striking is that if you were to design a plan to throw Social Security and Medicare into crisis, and then make a rescue all but impossible, you could not design a better plan than what the Democrats have implemented.

Do the elderly citizens of this nation understand this? If so, why the silence?

Start screaming now to stop excessive new spending and see that what we are already committed to is properly funded.

As for those younger, you will face higher debt, higher taxes, and a weaker economy because of these policies.

For the unborn, talk about taxation without representation! Those unborn and very young are having huge burdens put on them to which they have no knowledge and have given no consent.

It is hard to think of a more immoral and anti-American set of policies.