The U.S. government’s finances are heading off a cliff. Uncle Sam’s balance sheet was already troublesome before the Coronavirus pandemic forced him to use credit cards and the Federal Reserve’s printing press. Today, it defies the space-time continuum. A $3.3 trillion budget deficit – and counting – is crippling Washington. On Capitol Hill, every cupboard is bare, and each pocket contains nothing but lint. In the years to come, politicians will have tough choices to make, including taking an ax to the federal budget. One of them could be your retirement benefits as Republicans and Democrats might take Social Security seriously for once instead of using it as a political football every election cycle.
Social Security Goes Broke
The Congressional Budget Office (CBO) recently published an updated budget outlook to include an assessment of how the COVID-19 public health crisis has impacted the economy. It projects that the shortfall will total $13 trillion over the next ten years and that the national debt will, in 2021, easily exceed the levels of the Second World War by reaching 104% of the gross domestic product.
These might seem like inconsequential numbers, but they will have a severe effect on all U.S. government outlays moving forward. Social Security and Medicare are only two programs that will come under substantial pressure.
They were forecast to run out of money in 15 years, but the coronapocalypse could make it a lot faster. CBO data suggest that the insolvency date for the Social Security retirement program is 2031, while the Social Security Disability Insurance feature could be out of cash by 2026. The Medicare Hospital Insurance benefit could also face insolvency by 2024.
Despite millions of unemployed Americans, the CBO predicts that receipts from payroll taxes will increase this year, which is surprising considering that President Donald Trump is planning to defer the payroll tax to support the economic recovery. It also says that lower interest rates and price levels will help alleviate some of the rising costs of Social Security and other federal health care initiatives.
Many other analyses have highlighted the financial danger that waits for Social Security. The University of Pennsylvania’s Wharton School of Business warns that the SS trust fund could be depleted in 12 years if there is a U-shaped economic recovery. The Bipartisan Policy Center is a little less conservative, estimating the two trust funds could run out of money by the 2028 presidential election. And the Center for American Progress anticipates seniors who become eligible for SS in 2022 are likely to receive fewer benefits due to the pandemic.
Overall, turbulence is ahead for a fragile system.
A Retirement Crisis in the Making
Over the years, Liberty Nation has gone in-depth into the fiscal insanity of SS and the myriad of other federal retirement and health care policies. For decades, it was the most successful Ponzi scheme in history, but the Coronavirus is the catalyst that could drive SS to the brink of despair.
Before the pandemic, SS, in its present form, was never going to survive as numerous problems are crippling the entitlement. The primary challenge is a decline in the ratio of those paying into the system to those collecting from it. Its unfunded liabilities are estimated to be anywhere from $120 trillion to $200 trillion over the next 50 years. The main driver of revenue – the payroll tax – might not be enough to save it during the covidepression.
The retirement scheme has been under pressure since the second generation of retirees. But its issues were further exacerbated by former President Bill Clinton’s so-called solvency lockbox in the late 1990s. This took $3 trillion in SS surpluses to help pay down the national debt. It also meant that SS would receive $3 trillion in IOUs a decade before it started to draw on its reserves – a recipe for disaster.
Only a few people have proposed plans to help address the mess, with a couple of policymakers recommending raising the age of eligibility, conducting means testing, and even permitting young Americans to opt-out of the system altogether. No matter what the proposal is, Democratic and Republican leaders have chosen the most expedient course of action: kick the can down the road. Neither side is willing to make the tough choices regarding SS, particularly in an election year, which, judging by politicians’ seemingly constant recklessness, is all the time.
This decade-long dereliction of duty will only lead to seniors marching in the streets with their canes and walkers in a “fiery, but mostly peaceful protest” a la Antifa and Black Lives Matter.
Giving Up On The Dream
Everyone gets defensive about Social Security. If it were a sustainable, responsible, and conservative program, it would be understandable why the left and the right become apoplectic about any criticism surrounding this entitlement, while libertarians chuckle about how SS has contributed to America’s pending bankruptcy. But it is not sustainable, responsible, or conservative. Social Security is a ticking time bomb that is waiting to explode and cause a lot of misery for beneficiaries. Today’s generation has already given up on the dream that it will receive any meaningful benefits in its winter years, despite paying a large sum into the program every pay period. Like all good Ponzi schemes, SS will soon fall. But who will go to prison?
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Read more from Andrew Moran.
