Entitlement Mortgage Is Unpayable

The AP reports that, “The government is promising $45 trillion more than it can deliver on Social Security, Medicare and other benefit programs.”

The $45.1 trillion shortfall has increased by nearly $1 trillion in just one year, according to the administration's "Financial Report of the United States Government" for 2006. And, it's up 67.8 percent in just the past four years. In 2003, the shortfall between promised benefits and revenue sources over a 75-year period was put at $26.9 trillion.

The shortfall includes Social Security and Medicare in addition to Railroad Retirement and the Black Lung program.

Total estimated fiscal 2007 federal receipts are about $2.4 trillion, including about $.6 trillion from Social Security and medicare payroll taxes. Total estimated 2007 federal outlays are about $2.8 trillion, including almost $1 trillion for Social Security and Medicare.

Now, consider that you want to build a house that costs $45 trillion, and to get an interest only 6% loan, which means $2.7 trillion a year of interest-only payments, and your total income is $2.4 trillion.

Fat chance! Even with an expectation of increasing receipts of 5% a year, say from productivity-enhancing low tax rates and a booming economy, it would still be fat chance you’d get the loan.

I know this is oversimplified, but it brings into sharp focus the fiscal absurdity of the entitlement mess were already in and its deepening dimensions.

So-called solutions bandied about call for yet higher income, Social security and Medicare taxes. Yet, higher taxes reduce productivity, reduce economic growth, and lead to less federal receipts than otherwise.

But, some say, the rich can afford it. However, the top 10% of earners already pay 70% of income taxes. Further, they’ve paid a proportionately much higher contribution toward Social Security and Medicare taxes, for significantly much lower proportional benefits. (See here for some stats.) We’d have to impose exproprietory rates that would make the U.S. the reduced equal of Zimbabwe.

Now, let’s say you propose to add $2.6 trillion to that unaffordable debt, by legalizing 12-million illegal immigrants. No wonder eyeballs roll at the proponents of further debts we can’t afford. It’s not racism to feed your own before throwing open the doors to your table.

Yet, in the face of the obvious, recognizable by any responsible citizen, that the entitlements must be trimmed, congressmen and senators are hailed as brave for suggesting further delaying commissions. They should be commissioned to a nut house, and any who believe their empty rhetoric should join them.

It’s not a pretty prospect, particularly for those entering their retirement years, but boomers better adjust or bust, or bust their children and grandchildren. This will be the real measure of just how selfish and self-aggrandizing is the boomer generation, as if that needed further evidence.