Baby Boom Bomb - SOCIAL SECURITY AND MEDICARE COSTS SCHEDULED TO RISE SHARPLY AS RANKS OF RETIREES SWELL

The next two decades will be dangerous for taxpayers and the people who depend on them.

After slow-simmer growth rates since 1960, the number of senior citizens (those over age 65) will boil up from 20%  to 35% of the working age population (those age 18 to 64) by 2030.

Social Security and Medicare costs will rapidly expand from 7.8% to 11.4% of everything the country produces according to President Obama's people by 2030 - a pressurizing 46% increase.

Taxpayers can clearly see the financial bomb planted squarely in the middle of the road, but have not been able to wrest control of the steering wheel.


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Sources:

Data for the Dependency Ratio chart are from the 2009 OASDI Trustees Report, available at http://www.ssa.gov/OACT/TR/2009/tr09.pdf,  page 85, Table V.A2.

Data for Social Security and Medicare costs as a percent of GDP are from the 2010 Budget of the United States Government, Analytical Perspectives, page 192, Table 13-2, available at:
http://www.whitehouse.gov/omb/budget/fy2011/assets/spec.pdf

Paddling with the Penguins? US TREASURY REPORTS FEDERAL DEBT INCREASED $4.2 TRILLION IN 2009 - THAT IS $31,000 PER FAMILY

It's no secret that America's public debt is an iceberg floating in busy shipping lanes.

The $1.3 trillion federal financial shortfall of 2009 amounts to fresh public debt of $9,200 that the average US family will pay -- plus interest, of course.

But that deficit is just the tip of the iceberg. According to the newly released 2009 Financial Report of the United States, the government piled another $2.9 trillion in unfunded public liabilities on taxpayers, or another $21,300 per family. Ouch!

How? The value of government's increasingly threadbare "promises" to pay Social Security and Medicare benefits rose that much during fiscal 2009. It's the same old song: fewer workers, more oldsters, higher costs.

This perilous $3 trillion annual shortfall of largely retirement obligations  is not "calving" from emergencies. It's accumulated from decades of knuckleheaded leaders insideWashington and out (including we the people) who have failed to face the perennially predicted propulsion of demographics.

On the bright side, the $21,300 per family of public debt chalked up to future Social Security and Medicare is not yet spent. On the dark side, retirees fully expect to spend it.

The ship that is America's budget is steaming full speed ahead. There's an iceberg clearly in view. It's growing at $4 trillion a year. And the leaders supposedly at the wheel are bickering about relative trifles.

As mere citizens, we seem to squeeze our eyes shut and hope. Or we can grab the wheel. 
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Sources:
See the fiscal year 2009 Financial Report of the United States Government published by the US Treasury at http://www.fms.treas.gov/fr/09frusg/09frusg.pdf.  Refer specifically to the table on page xiii titled "Nation by the Numbers, A Snapshot of The Government's Financial Position and Condition".  This table includes "Net Operating Cost", very similar to the "Federal Deficit" of the headlines, and it includes Statements of  Social Insurance from 2008 to 2009, Open gGroup, 75 year projection period from which the changes in unfunded liabilities are calculated.

AVERAGE US FAMILY OWES $1 MILLION IN GOVERNMENT OBLIGATIONS. NO KIDDING.

Yep, as Americans, we are responsible for running up $1,028,000 of public obligations for the average family. No kidding.

First there's the hard debt - government's contractual obligations - in the amount of roughly $87,000 per family. That's approximately half the value of the average American home. It's more than chicken feed.

Then there's the semi-hard debt - primarily retirement benefits for civil servants that their governmental employers have not saved. That's almost as much, $73,000 per family. Taxpayers likely won't fork over that money without a contest.

Then there are the best loved brands in government: Social Security and Medicare. They are slated to consume $368,000 per family more than tax revenues over the next 75 years. Beyond 75 years, the two programs will be short another $500,000 per family. (The Treasury, Social Security and Medicare Trustees Reports, GAO, Census Bureau, Pew Trust on the States have additional details if you're interested.)

For perspective, it would take $1,028,000 per family invested today and growing to pay off government's debts, deals, and perceived promises -- federal, state and local -- as they come due.

This amount is in addition to the taxes citizens already pay.

Every year the balance is not paid down it grows at the rate of interest - like an unpaid mortgage.

I make the heroic assumption that taxpayers will not be called upon to make good on any loans that they have co-signed. No FDIC problems, no bad TARP money, no further Fannie and Freddie losses, no student loan troubles, etc...

It is important not to exaggerate the problem. America can cut the total unfunded liability in half easily, simply by deciding the country is not going to pay Social Security and Medicare to anyone now roughly 8 years old or younger or to those not yet born. Simple, right? As a practical matter, yes. As a political matter, no.

Visit MyGovSpending.com/beginner/new for a view of your family's total tax bill, it's share of government spending, and its share of the deficit and the national debt.

The numbers are big. There's not much time.


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Sources:
1) Federal "Debt Held by the Public" http://www.treasurydirect.gov/NP/NPGateway. State and local government contractual debt excluding debt issued by governments for private purposes is from http://www.census.gov/govs/estimate/0600ussl_1.htm
2) Unfunded federal employee retirement benefits from
http://www.gao.gov/financial/fy2008/08frusg.pdf Unfunded State and local employee retirement benefits from miscellaneous sources, soon to be updated with recent data from Pew Center on the States
3) Unfunded "entitlements" GAO, 2008 US Government Financial Report, pg 136, Table 5 and Table 6.

Government sources generally do not make estimates of current year data. MyGovSpending estimated current year data from the recent historical figures reported above using historical rates of increase.

Chamberlain Economics, LLC. provided the model for estimating of tax burdens by family to MyGovSpending, Inc. Unfunded liabilities per family were calculated at the same proportion to total unfunded liabilities as taxes per family are to total taxes.

Contact me for additional details.