The U.S. --- bankrupt now?

• QuakerOats

  http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and-we-don-t-even-know-commentary-by-laurence-kotlikoff.html
  
  "But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
  
  "The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years. "
  
  And:
  
  "How can the fiscal gap be so enormous?
  
  "Simple. We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year."
  
  "This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck. "
  
  "Herb Stein, chairman of the Council of Economic Advisers under U.S. President Richard Nixon, coined an oft-repeated phrase: “Something that can’t go on, will stop.” True enough. Uncle Sam’s Ponzi scheme will stop. But it will stop too late. "
  
  "And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills. "
  
  
  As some of us have been stating, SS is a ponzi scheme; and the largest one ever devised in world history. Higher taxes will not solve the problem, AT ALL. Only significant cuts in spending can have a chance at saving us, combined with a business friendly environment to spur growth. Unfortunately, both of these notions are in complete opposition to the socialist agenda of obama/pelosi/reid. What a sad way to wind down what was the greatest system in world history.
• IggyPride00

  

  What a sad way to wind down what was the greatest system in world history.

  It's been happening for 30 years now.
  
  We knew the boomers were going to be a fiscal burden, and instead of socking money away when times were good we ran up deficits.
  
  The entitlement programs wouldn't be the black hole they are had we not spent decades of suprluses on things totally unrelated to those programs. It's like the parent that robbed his kids college fund his whole life and then somehow acts shocked when the piggy bank is empty when it comes time to start paying tuition. Had the parent kept his hands off the money as was the original intent, there would be no problems.
  
  If the boomers ultimately get screwed out of their social safety net, its because they were complicit in electing crooks that piddled away their retirement on programs/policies that had nothing to do with what that money was earmarked for.
• jhay78

  

  The sad part is, while many were screaming a lot of this info (regarding SS and Medicare) from the rooftops a year ago, our Congress and Prez were busy pulling tricks, budget recociliations, backroom deals, and other BS to give us the largest unfunded mandate in history, Obamacare. SS and Medicare were the success models, according to Nancy Pelosi, and they're leading the way for us into the ground.
  
  
  Good quote from the article:
  

  Demand-siders say forgoing this year’s 14 percent fiscal tightening, and spending even more, will pay for itself, in present value, by expanding the economy and tax revenue.
  
  My reaction? Get real, or go hang out with equally deluded supply-siders. Our country is broke and can no longer afford no- pain, all-gain “solutions.”

• FairwoodKing

  I am on disability. If it were not for social security and Medicare, I would be a street person. I know the system is in trouble, but some of us can't live without it.
• Manhattan Buckeye

  IggyPride00;448296 wrote:It's been happening for 30 years now.
  
  We knew the boomers were going to be a fiscal burden, and instead of socking money away when times were good we ran up deficits.
  
  The entitlement programs wouldn't be the black hole they are had we not spent decades of suprluses on things totally unrelated to those programs. It's like the parent that robbed his kids college fund his whole life and then somehow acts shocked when the piggy bank is empty when it comes time to start paying tuition. Had the parent kept his hands off the money as was the original intent, there would be no problems.
  
  If the boomers ultimately get screwed out of their social safety net, its because they were complicit in electing crooks that piddled away their retirement on programs/policies that had nothing to do with what that money was earmarked for.

  
  I agree largely with this sentiment, perhaps not the vitriol although I understand where it comes from.
  
  The generational wealth divide is likely to be a HUGH issue for the next several administrations.
• IggyPride00

  

  perhaps not the vitriol although I understand where it comes from.

  I didn't necessarily mean it to sound vitriolic, but was trying to prove a point about how we got where we are.
  
  When Greenspan saved Social Security in the early 80's, it was expressly for the very reason of building a cushion in the good years so that when the boomers retired it wouldn't swallow up the budget.
  
  Instead for 30 years now we have had Republicans and Democrats use the surplus as an excuse to push their policy objectives be it tax cuts or more spending.
  
  The problem has been that somewhere along the line a free lunch mentality took hold in America (particularly among the boomers) that we could spend the surpluses of these programs as a big government slush fund and there would be no negative consequences down the line when the money was needed for the uses it was intended for.
  
  No one takes this debt crisis seriously. You have Democrats proposing more unsustainable spending, and Republicans proposing to keep tax cuts we couldn't afford in the first place, at the cost of almost $4 trillion dollars over the next decade when we are already $13 trillion in debt and on the precipice of the boomers retiring.
  
  It is just insanity to me that it hasn't taken hold with the general public yet how perilous the situation really is. Then again when we have unrealistic ideologues running both major parties it is not surprising.
  
  To avoid default on our debt it is going to take a combination of tax increases and spending cuts the likes of which will horrify both parties, and every day we delay the inevitable makes the situation that much worse.
• Mr. 300

  

  FairwoodKing;448354 wrote:I am on disability. If it were not for social security and Medicare, I would be a street person. I know the system is in trouble, but some of us can't live without it.

  
  May I ask why??
• QuakerOats

  IggyPride00;448443 wrote:I didn't necessarily mean it to sound vitriolic, but was trying to prove a point about how we got where we are.
  
  When Greenspan saved Social Security in the early 80's, it was expressly for the very reason of building a cushion in the good years so that when the boomers retired it wouldn't swallow up the budget.
  
  Instead for 30 years now we have had Republicans and Democrats use the surplus as an excuse to push their policy objectives be it tax cuts or more spending.
  
  The problem has been that somewhere along the line a free lunch mentality took hold in America (particularly among the boomers) that we could spend the surpluses of these programs as a big government slush fund and there would be no negative consequences down the line when the money was needed for the uses it was intended for.
  
  No one takes this debt crisis seriously. You have Democrats proposing more unsustainable spending, and Republicans proposing to keep tax cuts we couldn't afford in the first place, at the cost of almost $4 trillion dollars over the next decade when we are already $13 trillion in debt and on the precipice of the boomers retiring.
  
  It is just insanity to me that it hasn't taken hold with the general public yet how perilous the situation really is. Then again when we have unrealistic ideologues running both major parties it is not surprising.
  
  To avoid default on our debt it is going to take a combination of tax increases and spending cuts the likes of which will horrify both parties, and every day we delay the inevitable makes the situation that much worse.

  We also have a complicit media that fell in lockstep with the D's demagoguery when Bush even suggested that we must begin to privatize even just a small portion of SS accounts. Government must freeze spending today; cut spending tomorrow; implement pro-growth policies; and be forbidden from printing money.
• BGFalcons82

  

  QuakerOats;448516 wrote:Government must freeze spending today; cut spending tomorrow; implement pro-growth policies; and be forbidden from printing money.

  
  QO - that would take a revolution to make it happen. Maybe they'll get the hint on November 2. If not, get lots of cigs and ammo, it's gonna be a rough ride.
• Belly35

  

  I have Ammo ...
• jhay78

  

  IggyPride00;448443 wrote:I didn't necessarily mean it to sound vitriolic, but was trying to prove a point about how we got where we are.
  
  When Greenspan saved Social Security in the early 80's, it was expressly for the very reason of building a cushion in the good years so that when the boomers retired it wouldn't swallow up the budget.
  
  Instead for 30 years now we have had Republicans and Democrats use the surplus as an excuse to push their policy objectives be it tax cuts or more spending.
  
  The problem has been that somewhere along the line a free lunch mentality took hold in America (particularly among the boomers) that we could spend the surpluses of these programs as a big government slush fund and there would be no negative consequences down the line when the money was needed for the uses it was intended for.
  
  No one takes this debt crisis seriously. You have Democrats proposing more unsustainable spending, and Republicans proposing to keep tax cuts we couldn't afford in the first place, at the cost of almost $4 trillion dollars over the next decade when we are already $13 trillion in debt and on the precipice of the boomers retiring.
  
  It is just insanity to me that it hasn't taken hold with the general public yet how perilous the situation really is. Then again when we have unrealistic ideologues running both major parties it is not surprising.
  
  To avoid default on our debt it is going to take a combination of tax increases and spending cuts the likes of which will horrify both parties, and every day we delay the inevitable makes the situation that much worse.

  
  I'll agree with most of that. I can't ignore the fact that one party in particular encourages and thrives from that "free lunch mentality". I'm not absolving Republicans here- both parties are to blame.
  
  Good article from Allan Sloan
  
  http://socialsecurityinstitute.com/blog_post/show/598
  
  Another article from 1999, when there was a SS surplus:
  
  http://www.cato.org/pub_display.php?pub_id=4962
• believer

  

  Belly35;448600 wrote:I have Ammo ...

  ^^^Got an extra AR-15 or better yet, an M-16? I qualified expert.
• jmog

  believer;448623 wrote:^^^Got an extra AR-15 or better yet, an M-16? I qualified expert.

  
  No M-16, but I do have an AR-15.
• FairwoodKing

  Mr. 300;448465 wrote:May I ask why??

  
  Why am I on disability, why would I be a street person, why is the system in trouble, or why can't some of us live without it?
• Belly35

  

  believer;448623 wrote:^^^Got an extra AR-15 or better yet, an M-16? I qualified expert.

  
  One AR-15, One Sig. P220 .45 and One Sig. P226 9MM and One Tomahawk (effect range 25 feet or close combat)
• Mr. 300

  

  FairwoodKing;448630 wrote:Why am I on disability, why would I be a street person, why is the system in trouble, or why can't some of us live without it?

  
  All of the above
• BGFalcons82

  

  How in the sam hell did the elitists F-up social security? Forget about parties...there was a surplus and these ingrates saw money that they thought was theirs and so they spent it. Then spent more. Then saw that there was still some left and guess what?...they spent more.
  
  See the pattern here? Spending? Comprende? It's not that we weren't taxed enough, as 12.4% will surely garner a boatload of cash. The problem is that they saw a pot of gold and spent it until there's nothing left. The elitists know-it-alls left us some "IOU's" and now they have come due. Now the Ponzi scheme is on its last legs and we, the taxpayers, are the ones looking at the elites and asking, "What the F happened?", "Why did you spend money that wasn't yours to spend?" and "Where's the money you say is mine?"
  
  Now the socialists are on here saying to raise the age to 70 (or higher) and raise the taxes again to pay for the theivery of the past 20+ years. Why aren't these theives in prison, anyway? Screw that. How about opening accounts in our names, putting the money in it that is confiscated, and getting the hell out of our lives? Oh...that's right...we're too damn stupid to know what to do with our own money. We need the mighty government to do it for us. Bullbutter.
• tk421

  

  Despite whatever they decide to do with it, I know that I won't see a single penny of SS money. I'm 25 and by the time I get that age, the "retirement" age is liable to be 80. People need to plan themselves and stop depending on the government.
• Cleveland Buck

  

  Social Security was bringing in more money than they were paying out, but it was never enough to pay $4 trillion per year for 20-30 years of baby boomers even if they saved every penny. It is a ponzi scheme that was destined to eventually blow up in our faces as soon as that idiot FDR signed it into legislation.
• Cleveland Buck

  

  tk421;448794 wrote:Despite whatever they decide to do with it, I know that I won't see a single penny of SS money. I'm 25 and by the time I get that age, the "retirement" age is liable to be 80. People need to plan themselves and stop depending on the government.

  
  You have a zero percent chance of collecting Social Security when you are 80. I am skeptical as to whether there will even be a United States of America when you are 80.
• gut

  Bill Gross has been saying for years that the solution might very well be to inflate our way out (read: devalue the dollar). Inflation has averaged 2-3% a year since volker choked it off 25 years ago, but let that get up to 7-8% annually and you halve the cost of those entitlements in 9-10 years. It would be a tough line to walk, but inflation isn't necessarily counterproductive to growth provided wages and investment returns keep pace. It PUNISHES savings and fixed income investments unmercifully....and, well, guess who that hits the most - baby boomers.
  
  There are four basic strategies to help protect your nest egg against this (in order of risk): a house (with the obvious caveats), commodities (be careful of gold, highly speculative you want to also own things like oil, natural gas, copper, silver, uranium), equities (the markets can and should do pretty well in periods of inflation because company earnings should grow commensurately with rising prices), and international investments (non-dollar denominated).
  
  There are only two reasons to sit on cash: you are saving for a large purchase like a house or car or a retiree with no other income (short investment horizon which is risky to put money in the market) OR you are afraid of a market correction/bear market. Since no one can consistently time the market, I recommend some defensive strategies that can reduce risk as opposed to hoarding cash.
• gut

  Cleveland Buck;448801 wrote:Social Security was bringing in more money than they were paying out, but it was never enough to pay $4 trillion per year for 20-30 years of baby boomers even if they saved every penny. It is a ponzi scheme that was destined to eventually blow up in our faces as soon as that idiot FDR signed it into legislation.

  
  One need look no further than the legacy overhang that sunk GM and Chrysler and nearly Ford. The generous UAW pensions is a microcosm of what we will inevitably see with SS. Pay as you go systems only work if the working age population continues to grow, and that is not happening.
• IggyPride00

  

  Cleveland Buck;448801 wrote:Social Security was bringing in more money than they were paying out, but it was never enough to pay $4 trillion per year for 20-30 years of baby boomers even if they saved every penny. It is a ponzi scheme that was destined to eventually blow up in our faces as soon as that idiot FDR signed it into legislation.

  
  Your numbers are way off.
  
  The most recent data from the SSA show that the S.S trust fund is solvent through 2037 assuming the trust fund IOU's are honored. Past that, the income generated on S.S alone with no increases in taxes alone is enough yearly to support benefits at 75% of their current levels.
  
  By 2040 most of the boomers will be dead, at which point the system will be under less stress.
  
  The issue is going to be when the SSA goes to cash in the IOU's, and people get pissed that taxes have to go up to make up for the fact the surplus was either spent or given away in a tax cut (depending on which side of the aisle you're on.
  
  Had the politicians we elected not used the surplus for new spending or justification for tax cuts, the program would be in no trouble. That is our fault as citizens for electing the crooks that did it, not the S.S program.
  

  Pay as you go systems only work if the working age population continues to grow

  Which is exactly why the Greenspan commission created the surplus for the inevitably of the boomers retiring. It was a pay as you go system up to that point, but the actuaries rightly realized that it would not be possible given the demographics of the country. The boomers were prefunding their retirement, which was the responsible thing to do.
  
  The problem, as i said, came when liberals and conservatives saw a surplus and couldn't help themselves to spend it, or use it as a justification to cut taxes.
• gut

  IggyPride00;448852 wrote: The problem, as i said, came when liberals and conservatives saw a surplus and couldn't help themselves to spend it, or use it as a justification to cut taxes.

  
  Agreed. And it's not just the size of govt that has grown to an out-of-control problem, salaries & benefits have become obscene. They used to make about 60% of what their counterparts in industry got, but this was largely offset by more generous retirement benefits. Now they make over 100% of what counterparts do, and while their counterparts in industry have seen retirement benefits cut, govt workers have continued to see increases in their benefit plans.
  
  There's a pretty significant opportunity there, but I've heard barely a whimper of touching that. Politicians won't cut their own pay and benefits, nor will they touch that of their friends and people working for them.
• IggyPride00

  

  but inflation isn't necessarily counterproductive to growth provided wages and investment returns keep pace.

  Problem is that for 30 years wages haven't kept up, and to fill the gap between rising prices and stagnant wages we put it on credit cards to make up the difference.
  
  Globalization/unemployment are going to keep a somewhat permanent lid on wages, so inflation would be a disaster right now.