The Federal Government owes far more money than the world could produce in one year. (link)
Let me explain how this works. First, the deficit and national debt numbers are the number that represent cash flow. As anyone knows, cash flow will only tell you where you are getting money from and where you are spending it. So far, we’ve had to borrow trillions just to get to where we are now.
A more accurate number, the GAAP calculated debt and deficit, is what companies who operate in the US have to report. In that number, money that was actually borrowed is counted, as well as money that is owed but not paid yet. That is, future obligations that will have to be met, as well as future sources of income. In that number, we are $65,500,000,000 in debt, or we owe more money than the entire world could produce in a year.
It’s nice that the US has had such a run after World War II. But it has to end now. No longer can we promise what we don’t have.
When President Bush said now was the time to privatize Social Security and Medicare, he wasn’t joking. We’ve passed the opportunity to turn Social Security from a Ponzi Scheme into an investment. Now we only have one question: When do we tell Social Security recipients that there isn’t enough money in the world to pay their benefits? The same goes for Medicare. It was a nice run, but it’s absolutely over now.
If you depend on Social Security and Medicare right now, maybe you can count on it for a few more years, but maybe not. If you’re going to depend on Social Security in a few years, I suggest you consider the Social Security checks as uncertain at best, and plan for supplying your own retirement. You shouldn’t count on Medicare either.
What has happened? It’s simply, really. See, the way you build up for retirement is you save your money and then have that money grow with interest. You do so by investing in risky but good investments in the early years, and then shifting to reliable and passable investments in the later years. Your cash will grow and in the end, a few tens of thousands of dollars in your retirement plan can become millions. That’s the magic that makes the rich rich and the poor poor. The rich put the power of interest to work for them, while the poor put it to work against them.
What the United States Federal Government did with your Social Security money is shameful. They never invested it. It never grew. They took whatever surplus there was each year and spent it frivolously, leaving an IOU behind. Well, now there are so many IOUs in the Social Security account that the American taxpayer can never pay it back. When Social Security passes the point of net income and becomes an expense, then it will have to start asking for those IOUs back from the American Taxpayer. Your federal income taxes will not only be spent on social programs and the military, but on Social Security as well. The demands of the Social Security system will grow, until there is no hope of ever collecting enough taxes to pay them. At that point, the Federal Government will have to choose who will get the checks and who won’t, and how much.
The Federal Government should, immediately, shut down the Social Security program. It’s going to hurt a lot of retired people badly. Our only hope is that Americans are privately productive enough so that the could, perhaps, help out with those who needed Social Security the most. If we simultaneously cut social spending to effectively zero, and cut taxes significantly, the resulting boom in the economy may produce enough excess wealth that finding people wealthy enough to sponsor a Social Security refugee won’t be a problem.
