adios
09-22-2004, 03:04 AM
From the JoeRepublican post:
He is happy to see his father, who is now retired. His father lives on Social Security and a union pension because some wine-drinking, cheese-eating liberal made sure he could take care of himself so Joe wouldn't have to.
should be changed to /images/graemlins/smile.gif:
He is happy to see his father, who is now retired. His father lives on SocialSecurity and a union pension because some wine-drinking, cheese-eating liberal made sure he could take care of himself so Joe wouldn't have to but Joe will have to live in a homeless for his retirement because both the government and the company will be broke.
A very sobering look at the plight of Social Security and Medicare. A public trustee of the trust funds writes that JoeRepublican and BillDemocrat will be paying a lot more taxes to support the baby boomers without reform of these entitlements. If these entitlements are so great why do they threaten our solvency if they're not reformed. If the Bush "ownership society" philosophy would have been adopted long ago we wouldn't be is this friggen mess.
How Are We to Pay for All This?
By THOMAS R. SAVING
September 22, 2004; Page A28
Social Security checks for many seniors in January will be smaller than they will be in December. The reason: Medicare (Part B) premiums, which are automatically deducted from Social Security, will rise by 17.5%. But the cost of living increase for Social Security for the last several years has averaged only 2.4%. These changes are automatic and reflect the bipartisan will of Congress. Cost of living increases protect the elderly from inflation. Medicare premium hikes assure that seniors pay one-fourth the cost, leaving taxpayers to pay the remainder.
Yet in anticipation of senior backlash, some politicians are seizing the opportunity for demagoguery. John Kerry is blaming President Bush. Some in Congress want to delay the premium increase for a year. A bill by Democrats Ted Kennedy and Debbie Stabenow would prevent all future Medicare increases from exceeding the rise in the consumer price index, thus establishing a new and expensive entitlement. It's hard to imagine a more irresponsible proposal.
The latest reports from the Trustees of Social Security and Medicare calculate the present values of the cash flow deficits for both programs and the numbers are staggering. Social Security's funding gap for the next 75 years stands at $5.2 trillion. Medicare's unfunded costs come to $28 trillion, including $8.1 trillion due to the new prescription drug benefit. The combined $33.2 trillion shortfall is about three times the current size of our economy.
[Pity the Kids]
Bleak as this picture is, over a longer horizon the situation is worse. Consider people retiring 76 years from now. A 75-year calculation counts all of the payroll taxes these people will pay but ignores the benefits they expect to receive. To measure what happens after the 75th year and beyond, the trustees now calculate the unfunded obligations over an infinite horizon.
The Social Security system's long-run cash flow deficit is $11.9 trillion, and the new prescription drug benefit will require $16.6 trillion. Add in Medicare Part A (hospital insurance, completely paid by taxpayers) and Part B (doctors' insurance, three-fourths funded by taxpayers) and the total Medicare shortfall comes to $61.9 trillion. Over and above payroll taxes and premium payments made by the elderly, the unfunded liability in these two programs combined totals more than $73 trillion -- about seven times the size of our economy. A new entitlement, keeping Part B premiums from rising no faster than the rate of inflation, would make this burden even worse. My colleague Andrew Rettenmaier has calculated that if this policy were to be continued indefinitely, the new unfunded liability would total $6 trillion, more than half the size of Social Security's unfunded liability!
Some have argued that the financial problems of elderly entitlements will not arise until the distant future. In reality, we are dealing with those burdens right now. This year, for the first time in recent memory, Social Security and Medicare combined will spend more than the programs take in. This will require a transfer from the Treasury of 3.6% of federal income tax receipts. That figure will grow rapidly. In just 15 years, in the early stages of the baby boomers' retirement, we will be transferring more than 25% of federal income tax revenues to cover the funding needs of Social Security and all parts of Medicare. By 2030, more than half of all federal income tax revenues will be required to pay projected benefits of these programs under current law. By 2040, the figure will be two-thirds, and by 2069, funding shortfalls will exhaust all federal income tax revenues. (See graph, alongside.)
Clearly, either we must begin to set aside resources to provide for the promises we keep making to seniors or take away some of these promises. If we choose to set something aside to pay promised benefits, these funds must be invested in real assets. This is in contrast to the current practice of collecting surpluses, crediting the amount to the Trust Fund and then spending the funds on other government projects.
It is time to face reality. Current elderly entitlement programs saddle the next generation of workers with increasing implicit debts. We must introduce reforms that capture the earning potential of the baby-boom generation before they escape into retirement and leave the young with a burden that cannot be paid. Unless we increase our level of saving now, we will leave our children and grandchildren strapped with escalating tax rates.
Some have suggested that we can wait and raise taxes or lower benefits when the cash flow crisis arrives, but this is not a problem that tweaking will solve. The taxes implied by the Trustees' forecasts are enormous, and benefit cuts will hurt retirees who have planned on receiving benefits in return for the taxes they paid over their work lives. Others have argued that economic growth will ease the burden in the future. But the forecasts made by the Trustees take into account projected growth in the nation's output. If output rises more rapidly than the Trustees project, benefits will also rise proportionally.
Due to the changing demographic structure and rising expenditures on medical care, the share of the nation's output consumed by the elderly will rise. It is this rising share of the economy, financed in large part by Social Security and Medicare transfers, that will drive a growing tax burden. Saving more now for retirement reduces the burden on future taxpayers while at the same time increasing the nation's capacity to produce.
This generation of workers faces a clear choice. Will they tighten their belts a bit and save more? Or will they ask their children and grandchildren to choose between reneging on promises to retirees, going without government services, or paying exorbitant tax rates?
Mr. Saving is a public trustee of the Medicare and Social Security Trust Funds, director of the Private Enterprise Research Center at Texas A&M, and a senior fellow at the National Center for Policy Analysis.
He is happy to see his father, who is now retired. His father lives on Social Security and a union pension because some wine-drinking, cheese-eating liberal made sure he could take care of himself so Joe wouldn't have to.
should be changed to /images/graemlins/smile.gif:
He is happy to see his father, who is now retired. His father lives on SocialSecurity and a union pension because some wine-drinking, cheese-eating liberal made sure he could take care of himself so Joe wouldn't have to but Joe will have to live in a homeless for his retirement because both the government and the company will be broke.
A very sobering look at the plight of Social Security and Medicare. A public trustee of the trust funds writes that JoeRepublican and BillDemocrat will be paying a lot more taxes to support the baby boomers without reform of these entitlements. If these entitlements are so great why do they threaten our solvency if they're not reformed. If the Bush "ownership society" philosophy would have been adopted long ago we wouldn't be is this friggen mess.
How Are We to Pay for All This?
By THOMAS R. SAVING
September 22, 2004; Page A28
Social Security checks for many seniors in January will be smaller than they will be in December. The reason: Medicare (Part B) premiums, which are automatically deducted from Social Security, will rise by 17.5%. But the cost of living increase for Social Security for the last several years has averaged only 2.4%. These changes are automatic and reflect the bipartisan will of Congress. Cost of living increases protect the elderly from inflation. Medicare premium hikes assure that seniors pay one-fourth the cost, leaving taxpayers to pay the remainder.
Yet in anticipation of senior backlash, some politicians are seizing the opportunity for demagoguery. John Kerry is blaming President Bush. Some in Congress want to delay the premium increase for a year. A bill by Democrats Ted Kennedy and Debbie Stabenow would prevent all future Medicare increases from exceeding the rise in the consumer price index, thus establishing a new and expensive entitlement. It's hard to imagine a more irresponsible proposal.
The latest reports from the Trustees of Social Security and Medicare calculate the present values of the cash flow deficits for both programs and the numbers are staggering. Social Security's funding gap for the next 75 years stands at $5.2 trillion. Medicare's unfunded costs come to $28 trillion, including $8.1 trillion due to the new prescription drug benefit. The combined $33.2 trillion shortfall is about three times the current size of our economy.
[Pity the Kids]
Bleak as this picture is, over a longer horizon the situation is worse. Consider people retiring 76 years from now. A 75-year calculation counts all of the payroll taxes these people will pay but ignores the benefits they expect to receive. To measure what happens after the 75th year and beyond, the trustees now calculate the unfunded obligations over an infinite horizon.
The Social Security system's long-run cash flow deficit is $11.9 trillion, and the new prescription drug benefit will require $16.6 trillion. Add in Medicare Part A (hospital insurance, completely paid by taxpayers) and Part B (doctors' insurance, three-fourths funded by taxpayers) and the total Medicare shortfall comes to $61.9 trillion. Over and above payroll taxes and premium payments made by the elderly, the unfunded liability in these two programs combined totals more than $73 trillion -- about seven times the size of our economy. A new entitlement, keeping Part B premiums from rising no faster than the rate of inflation, would make this burden even worse. My colleague Andrew Rettenmaier has calculated that if this policy were to be continued indefinitely, the new unfunded liability would total $6 trillion, more than half the size of Social Security's unfunded liability!
Some have argued that the financial problems of elderly entitlements will not arise until the distant future. In reality, we are dealing with those burdens right now. This year, for the first time in recent memory, Social Security and Medicare combined will spend more than the programs take in. This will require a transfer from the Treasury of 3.6% of federal income tax receipts. That figure will grow rapidly. In just 15 years, in the early stages of the baby boomers' retirement, we will be transferring more than 25% of federal income tax revenues to cover the funding needs of Social Security and all parts of Medicare. By 2030, more than half of all federal income tax revenues will be required to pay projected benefits of these programs under current law. By 2040, the figure will be two-thirds, and by 2069, funding shortfalls will exhaust all federal income tax revenues. (See graph, alongside.)
Clearly, either we must begin to set aside resources to provide for the promises we keep making to seniors or take away some of these promises. If we choose to set something aside to pay promised benefits, these funds must be invested in real assets. This is in contrast to the current practice of collecting surpluses, crediting the amount to the Trust Fund and then spending the funds on other government projects.
It is time to face reality. Current elderly entitlement programs saddle the next generation of workers with increasing implicit debts. We must introduce reforms that capture the earning potential of the baby-boom generation before they escape into retirement and leave the young with a burden that cannot be paid. Unless we increase our level of saving now, we will leave our children and grandchildren strapped with escalating tax rates.
Some have suggested that we can wait and raise taxes or lower benefits when the cash flow crisis arrives, but this is not a problem that tweaking will solve. The taxes implied by the Trustees' forecasts are enormous, and benefit cuts will hurt retirees who have planned on receiving benefits in return for the taxes they paid over their work lives. Others have argued that economic growth will ease the burden in the future. But the forecasts made by the Trustees take into account projected growth in the nation's output. If output rises more rapidly than the Trustees project, benefits will also rise proportionally.
Due to the changing demographic structure and rising expenditures on medical care, the share of the nation's output consumed by the elderly will rise. It is this rising share of the economy, financed in large part by Social Security and Medicare transfers, that will drive a growing tax burden. Saving more now for retirement reduces the burden on future taxpayers while at the same time increasing the nation's capacity to produce.
This generation of workers faces a clear choice. Will they tighten their belts a bit and save more? Or will they ask their children and grandchildren to choose between reneging on promises to retirees, going without government services, or paying exorbitant tax rates?
Mr. Saving is a public trustee of the Medicare and Social Security Trust Funds, director of the Private Enterprise Research Center at Texas A&M, and a senior fellow at the National Center for Policy Analysis.