Fiscal Fact-Check: Deficit, Social Security, and Medicare
Updated Sept. 29, 2012
America’s economic system is in grave danger. Like your personal finances, fiscal discernment in U.S. public policy is important for our economic recovery.
A Harvard study reveals that massive U.S. borrowing and spending have wasted trillions of dollars in flawed efforts to stimulate the economy. In addition, the study indicates government spending causes companies to cut back.
American voters should demand what’s best for the citizenry now and for the generations to come.
Consider these salient facts:
The U.S. has a $16 trillion deficit and climbing. The debt is tracked by different organizations, which you can watch in real time at www.usadebtclock.com or www.usdebtclock.org.
With a national deficit of about $16 trillion, the nation’s debt per person is about $400,000. The federal debt per household is more than $1 million. These worrisome figures will continue to climb as the national debt escalates.
Countless foregn governments own billions of dollars of U.S Treasury Securities. According to federal data, as of May 2012, it shows the 10 biggest owners of U.S. Treasurys:
1. China – $1169.6 billion
2. Japan – $1105.2 billion
3. Oil Exporters – $260.9 billion
4. Brazil- $243.4 billion
5. All Other – $229.9 billion
6. Carib Bnkng Ctrs – $229.8 billion
7. Taiwan – $187.6 billion
8. United Kingdom – $161.1 billion
9. Russia – $154.1 billion
10. Switzerland – $150.5 billion
Social Security now pays more in benefits than it collects in taxes. According to Social Security, there are too few Americans paying into the system, as workers retire. Millions of baby boomers have opted for early Social Security checks because they can’t get a job.
Five decades ago, in 1960, there were 4.9 Americans paying into Social Security. Now, there are only 2.8 workers. The Congressional Budget Office says the figures continue to worsen – only 1.9 workers will be paying into the system in 2035.
The average retiree gets $1,235. Disabled workers’ average is $1,111.
Some 56 million Americans get Social Security checks now, and the number will skyrocket to 91 million in 2035.
The Social Security situation worsens the federal budget deficit. Because the federal government and its agencies have spent far more than they get in tax revenue – Congress has been raiding Social Security, which used to have a surplus.
Congress justified the raids by ordering the Treasury Dept. to issue two special bonds, which are worth $2.7 trillion, for trust funds. One fund is for retirees and the other is for disability recipients.
In 2012, Social Security is forecast to have a $166 billion shortfall, including the $112 billion from the temporary payroll tax reduction. The temporary reduction actually hurts American workers – as a result, they’ll earn less money for their retirement.
Social Security is scheduled to pay out $789 billion in 2012, but will only receive $623 in payroll taxes.
Social Security is surviving by tapping into the interest from the trust funds. It’s forecast to be bankrupt in less than 20 years.
Medicare’s fiscal issues are worsening. President Obama and his fellow Democrats claim they’re working to save Medicare. So far, the facts from the Congressional Budget Office (CBO – www.cbo.gov) show otherwise.
To partially fund ObamaCare, Democrats are taking $716 billion dollars from Medicare for nine years starting in 2013. What’s worse, the ObamaCare legislation implements more than 160 changes adversely affecting Medicare.
It also hurts health services. (See: Healthcare Crisis – What the Plight of Doctors Means to You)
Efforts to save Medicare are stymied by politics. As a member of Congress, Paul Ryan (R-Wis.), introduced a plan that would upgrade Medicare and change the government’s role by providing senior citizens with grants, net amounts or vouchers – whatever term you choose to use.
Over a nine-year period, the CBO estimated it would have saved $30 billion and recipients would pay an out-of-pocket $6,400.
But 100 percent of the Democrats voted against the plan.
So, Rep. Ryan teamed up with a liberal counterpart – Sen. Ron Wyden (D-Ore.) to come up with a compromise. After Rep. Ryan was named as a running mate for Mitt Romney, Sen. Wyden sought to distance himself for political reasons. But he says he’s still committed to fixing Medicare’s fiscal problems.
Rep. Ryan’s new reform’s key elements:
- Senior citizens will be allowed to stay with the current system.
- No one over 55 would be affected. After 2023, 65-year-olds can choose either the status quo or a government-provided net amount.
- The average out-of-pocket expense to senior citizens will only be $800.
- Medicare would not go bankrupt.
Other issues affect the nation. They include consistently high unemployment, sluggish economic growth, uncompetitive school systems, crumbling infrastructure, and increasing poverty (one out of six Americans).
There are pocketbook issues for everyone. Food costs have been climbing even before the drought, and motorists in many areas are suffering from high prices at gas stations.
So it doesn’t help with the administration imposing unnecessary regulations on the petroleum industry, assailed important exploration tax breaks, and hasn’t approved new areas for exploration.
As a matter of fact, both politcal parties have played a negative role:
- Pres. Bush didn’t veto one pork bill from the Republican-dominated Congress until six years into his presidency. The deficit started under his watch.
- The Obama Administration hasn’t kept one promise made to small business –the nation’s jobs engine – prior t0 the 2008 election. None of his policies has worked to solve the nation’s issues. The deficit continues to explode.
Such fiscal dysfunctions prompt this question: Why do we want to risk burdening our children and grandchildren?
Let’s insist on three Ps – productive public policies – to benefit this great nation. That means understanding the facts and taking steps for fiscal sanity.
From the Coach’s Corner, related issues:
- Nonpartisan Study: Obama’s Tax Plan Hits 53% of Business Earnings
- Is it Too Much to Ask For Civility and Honesty from Mr. Reid and the Press?
- Economic Analysis by Noted Economist Peter Morici
“If you ever injected truth into politics you have no politics.”
-Will Rogers
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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.
Why You Can’t Get Work or Hire Workers
Are you one of the countless baby boomers who is relying on Social Security before you reach retirement age? You’re not alone. The dearth of jobs has prompted many Americans to accept lower Social Security payments at the age of 62. This means Social Security is forecast to start paying out more in benefits than it receives starting in 2017.
The Labor Dept. says some 2.7 million Americans will lose their unemployment parachute checks near the tax-filing deadline of April15. About 6.3 million folks have been out-of-work for six months or longer.
The government believes 15 million people are jobless. That’s only an estimate. It doesn’t include the high number of self-employed people desperately taking independent contractor projects because they can’t find jobs, or the under-employed taking temporary jobs.
These numbers also jurt job creation. Higher unemployment rates charged to business by government is a disincentive, too.
After having worked through 6 major economic downturns, my analysis of the data and the trends is that the real unemployment rate is about 25 percent. That’s depression-like, not recession-like numbers.
A recent study proves it’s getting worse for American workers. The Center for Labor Market Studies at Northeastern University in Boston sums up the problem in its study’s subtitle – “A Truly Great Depression Among the Nation’s Low Income Workers Amidst Full Employment Among the Most Affluent.”
For the nation to catch up, most experts believe 100,000 new jobs need to be created every 30 days. But veteran pragmatists know it won’t happen. Count me as one of those.
The job drought is not a new phenomenon in the sense that it’s been years in the making. The federal government began tracking the number of unemployed in 1948.
Many jobs have not and will not return. Not to over-simplify, institutional investors own increasing numbers of companies. Largely, they extract profits by slashing payrolls and encouraging offshoring of jobs in Latin America and Asia where labor is cheaper.
Since 2000, automation is responsible to cutting 5.6 million jobs.
After each recession since 1970, job-growth rates have decreased. Published reports indicate that even before the Great Recession, it was less than one percent a year and was only 2.4 percent in the 1990s and 1980s, according to the Labor Department figures.
Based on trends following recessions, I’m in agreement with economists who forecast it will be at least five years before the unemployment rate returns to more palatable levels – hence, the term, jobless recovery. Even then, I’m not sure it will happen.
Historically, consumer spending has been a key ingredient for economic recovery. But that won’t happen unless there’s a fundamental economic change.
This also means the tax revenue pie for governments at all levels will remain flat.
For good reason, Americans have returned to 1930’s money values. They’re becoming tight-fisted with their money and are demanding government accountability.
The housing bubble resulted in a high volume of excise taxes, but the high rate of foreclosures alters that scenario.
Talk to anyone who checks credit for consumers or small businesses. The aggregate level of bad credit is huge –largely caused by the predatory behavior of big lenders. They’ve nearly destroyed the livelihoods of small businesses with mega interest rate hikes for bogus reasons.
Small business has historically has been the main job-creation engine, but no more.
Small businesses do not have the financial firepower expand and create jobs. New credit card legislation does nothing to correct the injustices.
Instead of focusing on helping business, government at every level, is hindering the economic climate. Economic and political freedoms are being stolen each day by bad government policy (See this site’s other Public Policy columns). The largest employer in many communities is government. Public-sector agencies are still growing, not laying off, while spending and taxing at ever-increasing levels. For the common good of all Americans, change is needed.
Businesses and consumers can no longer afford the status quo in taxes. Government must reform.
From the Coach’s Corner, effective on Feb. 22, 2010, here is the essence of the credit card law:
- Credit card companies cannot increase the rate in the first year until the introductory rate expires. The banks must give 45 days notice to change the rate.
- Unless two months past due, rates can’t be changed.
- The original interest rate must be granted once payments are on time for six months.
- The fine print will be easier to grasp.
- Activation and annual fees can’t exceed 25 percent of the credit limit in the first year; and will be unlimited after 12 months.
- Credit card statements must be sent three weeks in advance.
- Transactions can’t take place over the credit limit unless the cardholder agrees.
- The “universal fault” nonsense (if you were late one day on one payment, the other credit card companies jacked up your rate) is stopped and interest rates on existing balances must stay the same (see No.1).
- Companies can’t give students or anyone under 21 a car unless she/he has a co-signer or the autonomous ability to pay statements. Schools have to make public any credit-card marketing deals, and companies cannot stage publicity or giveaway events on or near campuses.