Destroying our economy and future
To the editor:
How did this financial crisis come about? After all, the need to deal with risk is not a new human problem. From the beginning of time, people have faced the risks of growing old and outliving their assets, dying young without having provided for their dependents, becoming disabled and not being able to support themselves and their families, becoming ill and requiring health care and not being able to afford it, or discovering that their skills are no longer needed in the job market.
These risks are not new. What is new is how we deal with them.
Prior to the 20th Century, we handled risks with the help of family and extended family. In the 19th Century, by the time a child was 9 years old, he was usually paying his own way in the household. In effect, children were their parents’ retirement plan. But during the 20th Century, families became smaller and more dispersed – thus less useful as insurance against risk. So people turned to government for help. In fact, the main reason why governments throughout the developed world have undergone such tremendous growth has been to ensure middle class families against risks that they could not easily ensure against on their own. This is why our government today is a major player in retirement, health care, disability and unemployment.
Government, however, has performed abysmally.
It has spent money it doesn’t have and make promises it can’t keep all on the backs of future taxpayers. The Trustees of Social Security estimate a current unfunded liability in excess of $100 trillion in 2009 dollars. This means that the federal government has promised more than $100 trillion over and above any taxes or premiums it expects to receive. In other words, for Social Security to be financially sound, the federal government should have $100 trillion -a sum of money six-and-a-half times the size of our entire economy – in the bank and earning interest right now. But it doesn’t. And while many believe that Social Security represents our greatest entitlement problem, Medicare is six times larger in terms of unfunded obligations. These numbers are admittedly based on future projections. But consider the situation in this light: What if we asked the federal government to account for its obligations the same way the private sector is forced to account for its pensions. In other words, if Medicare, how much would be owed in terms of benefits already earned? The answer is $52 trillion, an amount several times the size of the US. economy.
So, what does this mean for the future?
We know that Social Security and Medicare have been spending more than they are taking in for quite some time. As the Baby Boomers start retiring this deficit is going to grow dramatically. In 2012, only three years from now, Social Security and Medicare will need one out of every 10 general income tax dollars to make up for their combined deficits. By 2020, just 11 years down the road, the federal government will need one out of every four income tax dollars to pay for these programs. By 2030 the midpoint of the Baby Boomers retirement years, it will require one of every two income tax dollars. So it is clear that the federal government will be forced either to scale back everything else it’s doing in a drastic way or raise taxes dramatically.
I have not even mentioned Medicaid, but it is almost as large a problem in this regard as Medicare. A recent forecast by the Congressional Budget Office an economic forecasting agency that is controlled by the Democrats in Medicare and Medicaid alone are going to crowd out everything else the federal government is doing by mid-century. And that means everything – national defense, energy, education, the whole works. We’ll only have health care. If on the other hand the government continues with everything else it is doing today and raises taxes to pay for Medicare and Medicaid, the Congressional Budget Office estimates that by mid-century a middle income family will have to pay two-thirds of its income in taxes. All of it is a sad commentary relating to what we truly want for our generations to come. By following this path, we are guaranteeing that our grandchildren will think of us as being selfish, irresponsible, and stupid. Spending beyond our means is destructive at every level and can only destroy our economy and our future.
Dick Kalfus
Cape Coral