2 years, 4 months ago
According to one recent estimate, the unfunded liability of Social Security plus Medicare is 107 TRILLION dollars! How will this be paid?
"The unfunded liability is the difference between the benefits that have been promised to current and future retirees and what will be collected in dedicated taxes and Medicare premiums. Last year alone, this debt rose by $5 trillion. If no other reform is enacted, this funding gap can only be closed in future years by substantial tax increases, large benefit cuts or both."
I think our government has no choice but to print dollars, but then, I don't think holders of our current debt such as China or Japan will like being paid back in dollars that are worth so much less.
Any solutions? Or will our standard of living just drop way down?
Source:
http://www.ncpa.org/pub/ba662
I think our government has no choice but to print dollars, but then, I don't think holders of our current debt such as China or Japan will like being paid back in dollars that are worth so much less.
Any solutions? Or will our standard of living just drop way down?
Source:
http://www.ncpa.org/pub/ba662
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M$2 Answers
They've been aware of this problem for a long time now, and the solutions are straitforward, but politically unpopular in the US, even though they were dealt with in other western industrialized countries.
The first is to just let people who don't want to retire at 65 keep working. Canada was facing a shortfall of ability to pay pension plan benefits, but they found that by just letting people work for two more years, and retire at 67, then given the wonders of compound interest on the two extra years of pension plan premiums combined with two less years of people drawing on the pension plan, it broke even again.
They didn't force people to keep working until 67... they just dropped the compulsory retirement clauses that were forcing people to retire at 65, so that if someone wanted to retire at 65 they could with no penalty, but if they wanted to keep working they could... they wouldn't be forced to retire (which they used to do, in order to make room for young people wanting to get started, but there's not as many young people being born as a percentage of the population as there used to be, so it doesn't matter so much anymore).
That leads to the issue of *how* those pension plan premiums were invested, and in the case of Sweden and Japan, both of whom have populations who naturally live a long time and, in the case of Swedes, who already have the ratio of elders to young workers that the US is just starting to move into, they allow public pension plan funds to be invested in blue-chip industries, whereas in the US, blue-chip investments are saved for the rich-elite to play with, leaving basic money-market and bond-type investments for pulbic pension plans to work with.
There is no solution if the american elite are going to insist on special access to the investments that produce the good returns, even though those returns are coming from the work of exactly the people who, when they get older, will be needing some payback for all their labour (they do it by calling it "socialist"... and you'd have to live in the US for awhile to see just how comical it is they way they've turned that word into having demonic implications... they did it by confusing everyone into thinking that socialism and communism are the same thing, when in fact there's nothing communists hate more than socialists, but that's another story...) and so for now the politicians are all sticking their heads benieth the sand, but Japan has already given the US a head's up notice that although it has trillions of dollars in savings, that the US is not to come to them to ask for assistance *because* those savings are *already* earmarked for their future elderly.
The first is to just let people who don't want to retire at 65 keep working. Canada was facing a shortfall of ability to pay pension plan benefits, but they found that by just letting people work for two more years, and retire at 67, then given the wonders of compound interest on the two extra years of pension plan premiums combined with two less years of people drawing on the pension plan, it broke even again.
They didn't force people to keep working until 67... they just dropped the compulsory retirement clauses that were forcing people to retire at 65, so that if someone wanted to retire at 65 they could with no penalty, but if they wanted to keep working they could... they wouldn't be forced to retire (which they used to do, in order to make room for young people wanting to get started, but there's not as many young people being born as a percentage of the population as there used to be, so it doesn't matter so much anymore).
That leads to the issue of *how* those pension plan premiums were invested, and in the case of Sweden and Japan, both of whom have populations who naturally live a long time and, in the case of Swedes, who already have the ratio of elders to young workers that the US is just starting to move into, they allow public pension plan funds to be invested in blue-chip industries, whereas in the US, blue-chip investments are saved for the rich-elite to play with, leaving basic money-market and bond-type investments for pulbic pension plans to work with.
There is no solution if the american elite are going to insist on special access to the investments that produce the good returns, even though those returns are coming from the work of exactly the people who, when they get older, will be needing some payback for all their labour (they do it by calling it "socialist"... and you'd have to live in the US for awhile to see just how comical it is they way they've turned that word into having demonic implications... they did it by confusing everyone into thinking that socialism and communism are the same thing, when in fact there's nothing communists hate more than socialists, but that's another story...) and so for now the politicians are all sticking their heads benieth the sand, but Japan has already given the US a head's up notice that although it has trillions of dollars in savings, that the US is not to come to them to ask for assistance *because* those savings are *already* earmarked for their future elderly.
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M$
In todays paper, there was a similar solution proposed:
http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=2009909270341
Back in 1935 when the Social Security was first started, people who lived to 65 were expected to live to 77, which means the payout was for an additional 12 years. So the article suggests gradually increasing the eligibility age 1 month for every 3 months, until the eligibility age reaches the age where on average, people would again get just 12 years of benefits before they died. That age would be 76 under present conditions. Now, I do not know if the age people die is going to increase anymore. In fact, with all the obesity, I suspect, the lifespan may actually decrease. Also, where are all the jobs going to come from? We already have a shortage of jobs, it seems. It was also my understanding that as originally conceived, you were not supposed to draw on the benefit unless you really needed it. It was not considered an "entitlement."
I would say the situation is more complex. If we did not have so much fraud in the system, such as improper monetary policy that led to this country's current financial bust, then this problem might not be even arising. Most pension plans are now currently underfunded too, not only Social Security.
Two articles appear today, the first reporting Social Security will be paying more out than taking in this year and next, because of job losses forcing people to collect Social Security earlier. The second reports that job seekers currently outnumber job openings 6 to 1.
http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=2009909280358
http://www.nytimes.com/2009/09/27/business/economy/27jobs.html