Sunday, March 17, 2013

The Nation's Deficits are Real and We're Headed for Disaster Unless We Deal with the Reality of an Aging Society

As do almost all elected officials while their political party is in office, President Obama apparently suffers from NIMA affliction.

He's displaying that 'illness' now when he says that the national debt isn't an urgent problem which needs to be addressed during the next ten years. That's wrong.

This NIMA 'sickness' argues that necessary political actions which may prove to be temporarily unpleasant or unpopular should be deferred. It's the 'not yet' instead of the 'no' argument. Thus, the incumbent political world is populated by NIMA adherents. And that's the genesis of can kicking. In other words, let's let the next guy deal with the real tough problems. The problem is that 'tomorrow' never comes. Until catastrophe strikes, that is.

Thus, the politician takes the position that what admittedly needs to be done shouldn't or can't be done yet, or at least NOT IN MY ADMINISTRATION. NOT YET is code for NIMA. Unfortunately, that's the reason for all the can kicking we're seeing about the nation's debt, deficits, Keystone XL pipeline decision and many other important matters.

To repeat, the President said last week that our nation's debt problem was not an urgent one and wouldn't become such for the next ten years. That's just not true

We have enormous debt and deficit issues today, and the longer we delay facing them squarely, the bigger they'll become and the longer it will take to get the U.S. back on track. There's no time to waste. We've wasted enough already.

In fact, the aging of the baby boomers and the resultant shrinkage in labor force participation are combining with a slow economy and high rates of unemployment to make an already bad situation even worse.

We the People need to insist on straight talk and solid solutions from our "public servants" instead of 'not yet' rhetoric. Instead the politicians keep practicing NIMA, and America keeps getting older and deeper in debt. {NOTE: My fellow oldsters may remember Tenneesse Ernie Ford's "another day older and deeper in debt" line from the song "Big John."}

The Deficit Deniers Should Do the Math provides the sobering details as to why the time to address these problems is now and not ten years down the road. By then we'll be ten years older than we are now, and by then we may have a disaster on our hands. Here's the story:

"There are nearly 80 million reasons for believing that decisive action on federal debt and deficits should start now. The Census Bureau projects that, by 2040, the number of Americans 65 and older will have climbed to 79.7 million, up from 44.7 million in 2013. That's one measure of the demographic time bomb that will cause an explosion in entitlement spending, which could, in turn, bust the federal budget.

The chart nearby helps explain why the impact of this demographic shock has so far been mild. It tracks the number of Americans 65 and older as a percentage of the number of working-age Americans, 18 to 64. This year, the share is 22.6%, up from 18.7% in 1980. By 2040, it will have soared to 36.6%.

Put more starkly, according to these percentages, there are now 4.4 people of working-age potentially supporting each senior citizen. By 2040, each senior citizen will be potentially supported by just 2.7 working-age individuals. I say "potentially" because we don't know how many 18-to-64-year-olds will actually have paying jobs and thus be directly contributing to government support of the seniors.

We do know that, to compensate for the plummeting ratio of the working-aged to seniors, the labor-force participation rate would have to rise to a degree too extreme to be taken seriously.

The aging of America is the key reason the deficit-deniers can't be taken seriously. Those who deny that debt and deficits should be dealt with now point out that budget projections for the next 10 years don't look especially worrisome. But instead of viewing this relatively brief breathing period as an opportunity to prepare, they regard it as an excuse to delay.

Ironically, the Congressional Budget Office, the source the deniers generally use when they cite numbers, is the same agency that has warned of rivers of red ink when elder-care dependency reaches critical mass around the mid-2020s. In its February report on the 10-year outlook through 2023, the CBO declared that "projections for the period covered in this report do not fully reflect long-term budgetary pressures," adding that "debt will rise sharply relatively to GDP after 2023." That's why the agency proposed "deciding now what policy changes to make to resolve that long-term imbalance…."

Concern about the soaring cost of elder care once energized former President Bill Clinton. Since Clinton's presidency is generally admired by the debt-deniers, they might regard his 1999 State of the Union address as required reading. Speaking of "the aging of America," Clinton noted that, "With the number of elderly Americans set to double by 2030, the baby boom will become a senior boom."

To handle this, Clinton proposed doing what any household would deem rational to save for old age: setting aside looming budget surpluses to shore up Social Security and Medicare, which he recognized weren't on a "sound footing."

The fact that those surpluses turned to deficits only makes Clinton's core message—14 years later--all the more urgent. If surpluses were required in 1999 to deal with the aging of America, then in 2013, the government should at least aim to balance its budget."

Summing Up

The future is now for fiscal responsibility.

Not ten years from now.

And our problems need to be confronted today while there's time to do so without compromising the future opportunities available to our kids and grandkids.

There's simply no more time to waste, and the problem is indeed an urgent one.

'Not yet' are two words that must be stricken from the political vocabulary.

"I will do it" should always be followed by the word NOW.

That's my take.

Thanks. Bob.

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