Medicare, Medicare Drug Program, Social Security, the Affordable Care Act and more have made promises to current and future Americans. Those promises are not subject to any budget constraints which means that we all expect these programs to be there for us and to deliver the promised benefits.
If you take the total value of those promises as they apply to the entire U.S. population less the value of any assets put aside to pay benefits (very little), you learn that the unfunded liability is over $101,595,000,000,000. In case you were wondering, that is a lot of money. In fact, it is over five times the entire annual gross domestic product (GDP) of the United States. It is about $316,000 for every individual American or about $849,000 per taxpayer.
The point is that unless we change several things, we cannot afford what politicians have promised. There must be a trimming of those promises, major changes in the tax code and how we fund those promises and/or sustained robust economic growth.
For decades our leaders have been adding benefits not paid for (Medicare Part D), created new and forever growing liabilities (Affordable Care Act), ignored the changes required like truly reforming the tax code and provided little leadership actually growing the economy. Rather, they ignore or play down the fiscal concerns or worse promise more. They underestimate or simply mislead about future costs. They allow the national debt to grow to over $19 trillion and claim it is no problem because interest rates are low … for now.
We have mortgaged our future and that of our children and grandchildren and beyond. Somehow all this has to be paid for and it will mostly be paid for by the middle-class despite the billionaire class rantings of Old BS. We didn’t get into this mess because people are not paying their fair share. We got into it because an entire generation has a buy now credit card mentality.
Nobody wants to hear that to keep Social Security solvent payroll taxes must increase 2.6% or a 21% increase over current rates. Rather, believing the myth that just taxing income without limit will both solve the current problem and allow for higher benefits is much easier. After all why not let 5% of the population carry the burden for the other 95%, that’s fair, right?
In real terms wages have not grown in over ten years while at the same time we have increased government liabilities for any number of programs. Those programs must be paid for sooner or later. Exactly how does that work? How much more can you take from the earnings of Americans, more accurately some Americans, before the whole thing collapses, especially in a slow -growing economy? Even now we are spending $500 billion more each year than is paid to the federal government.
I couldn’t solve a third grade math problem the other night, but it’s not hard to figure out that we are being led down a path and over a fiscal cliff that will only stop short of a fall with higher taxes on everyone. If you want to believe all the rosy predictions and promises from the politicians, be my guest. Just remember, you are living in a house of cards with a big wind headed our way.