Wednesday, May 6, 2015

The Affordability of Government Programs .. Pitting the Youngsters Against the Oldsters

If we have one dollar to spend today and actually spend two dollars, we'll need to borrow one dollar. If we continue to do that day after day, the dollars owed will pile up. If we also commit to spending additional dollars in the future and don't set aside sufficient funds to pay those future dollars due, we'll need to borrow even more dollars in the future. How many dollars we'll need is presently unknown.

As a society, we spend lots of money on educating our young. Most educators and other government officials say we need to spend even more. And that spending includes both K-12 and college attendees as well, again according to our free spending 'leaders.' How to pay for all this doesn't receive much, if any, attention.

We also need to protect the promised entitlements of Social Security, Medicare, ObamaCare and so forth, again in alignment with the politics of the situation. Again, how to pay for this doesn't receive much attention.
And by the way, we need to provide adequately for the nation's defense as well.

In order to do all these things, we need to maintain a growing economy with good jobs, higher wages and investments in order to be able to implement productivity and infrastructure improvements throughout America. There's also talk about reducing the highest tax rate in the world and stimulating additional private sector investment. To repeat, how to pay for this isn't receiving much attention.

Meanwhile, public sector unions remain a dominating influence in our local, state and national politics. Public sector unions bargain on behalf of government employees with the representatives of government, aka the taxpayers, for higher pay and benefits for those of our fellow citizens who serve as policemen, firemen and teachers, as examples. But how future citizen taxpayers will be able to afford to pay for what's been negotiated doesn't seem to have been a major concern at the taxpayer funded bargaining table.

If all this sounds to you like a huge problem in the making for America's future well being, it does to me too.

3 out of 4 retirees receiving reduced Social Security benefits tells us about the current problem with oldsters having enough money to live on and the coming Social Security affordability crisis that lies ahead:

"Growing numbers of workers expect to rely heavily on Social Security as a major source of income in retirement, but almost three-quarters of current retirees are receiving reduced benefits, according to two new reports.

According to a recent Gallup survey, 36% of adults who are not yet retired expect Social Security to be a “major source” of retirement income. That figure is roughly 10 percentage points higher than a decade ago and higher than any response in the past 15 years.

Of course, the best way to maximize Social Security is to delay claiming benefits until “full retirement age,” which is climbing gradually to 67, or beyond. A person due to receive a benefit of $1,000 at a full retirement age of 66 would receive only $750 at age 62 (the earliest age at which most people can claim benefits) – and $1,320 at age 70.

But that math isn’t stopping many workers from claiming benefits early.

Among the 37.9 million Americans receiving Social Security retirement benefits as of December 2013, fully 73% were receiving reduced benefits “because of entitlement prior to full retirement age,” according to a new report from the Social Security Administration. . . .

Currently, the Social Security Administration is tapping the interest on the program’s trust funds to pay beneficiaries and, soon, will begin drawing down the assets themselves. At the moment, the trust fund is scheduled to run out in 2033, after which Social Security recipients would receive about 75% of their benefits.

Against that backdrop, a recent Wells Fargo/Gallup survey found that only 28% of non-retired investors are very confident they will have enough savings at the time they decide to retire. An additional 48% are somewhat confident.

The latest Gallup survey concludes: “To the degree [workers’] savings are not sufficient to fund their retirement, [they] will have to make up the shortfall somehow."

Summing Up

The promises made by politicians and the funding of those promises by taxpayers are two entirely separate things, regardless of what the politicians may say --- or not say.

And Social Security benefits for many of the current American oldsters will have to be funded by future American workers. That's the only way today's unfunded promises will get paid.

Meanwhile, our U.S. educational outcomes continue to deteriorate compared to many countries around the world.

Yet the 'solution' is said to be more money and less testing with respect to how we stack up competitively with other nations.

It's a train wreck in the making with absolutely little being done to avoid it.

That's my take.

Thanks. Bob.

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