Medicare-Social Security Time Bomb!
By Gordon Bishop (07/23/07)
As President Bush and the U.S. Congress prepare to war over $23 billion in domestic discretionary spending in a 2008 fiscal year budget that will approach $3 trillion, now is a good time talk about the $90 trillion Social Security and Medicare elephant in the room.
It is a virtual certainty that both political parties will ignore it, at least until the next president is inaugurated in January 2009. Oh, there will be rhetorical heat during the presidential congressional campaigns. But in terms of substantive, responsible legislation passed by Congress and signed by the president, expect nothing – zilch!
Citing the 2006 Medicare trustees’ report, President Bush’s 2008 budget, which was issued in February, referred to Medicare’s “unfunded obligations – the gap between dedicated receipts and projected costs.
Given the $3.7 trillion total increase in 2006, the present value of Medicare’s unfunded obligations appear to be growing by $3—billion per month. Yes, that’s $300 billion per month!
At that rate, they should increase by another $5.7 trillion between now and January 2009, when the next president enters office, according to an editorial in The Washington Times.
With the first wave of ‘Baby Boomers’ (those born between 1946 and 1964) becoming eligible for Social Security next year and for Medicare three years later, the bipartisan, presidential-congressional abdiction of long-term fiscal responsibility that we shall witness over the next year-and-a-half will be nothing less than astonishing.
Compared to Medicare, Social Security is a piker. Including the $2 trillion in special Treasury bonds that occupy Social Security’s trust funds, which will have to be redeemed with general-fund tax revenue, the present value of the unfunded of the unfunded liabilities for Social Security’s retirement and disability programs totals $15.6 trillion over the infinite horizon.
To appreciate the relative size of the $90 trillion in unfunded liabilities for Social Security, consider four facts:
1. This year’s entire U.S. economic output, measured by its gross domestic product (GDP), will be $14 trillion.
2. Today, the total U.S. public debt outstanding (the “national debt) is $8.8 trillion, which, despite having skyrocketed by $3.1 trillion (54 percent) since President Bush entered office, is still less than the 10 percent of the present value of the entitlement nightmare galloping toward us.
3. The total net worth (as of March 31) of all U.S. households and nonprofit organizations, including their stockholdings, housing equity, SUVs and high-definition TVs, is $56.2 trillion.
4. The total market capitalization (number of stock shares times the share price) of the S & P 500 (the 500 leading U.S. corporations) was $12.7 trillion as of March 31.
To bipartisan, presidential-congressional abdication of long-term fiscal responsibility that we shall witness over the next year-and-a-half will be nothing less than incomprehensible.
What’s utterly amazing is that most American taxpayers and voters are really not aware or concerned about these numbers and what the future holds for them, their children, grandchildren and future generations of working taxpayers.
Gordon Bishop
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