Social Security, Medicare, and Unfunded Entitlements
Entitlements to our retiring citizens are estimated to be over $50 trillion -- one of the largest problems facing American today. Doing nothing now will only limit the options available in the future, making the problem harder and harder to solve.The United States Social Security Board of Trustees informs us that our Social Security System will start paying out more than it brings in by 2017 – only nine years from now! Only 24 years after that, the so-called Trust Fund will be depleted and the Social Security will be insolvent.
Medicare is worse shape. Mike Leavitt, secretary of the US Department of Health and Human Services recently said: "In fiscal 2019 -- just 10 years from now -- the Medicare Hospital Insurance Trust Fund will become insolvent, and there is no backup plan in the law to ensure that hospitals continue to be paid. If Congress does not act soon, its only choices later will be to raise taxes, cut benefits, and slash payments to providers."
Our nation’s retirees have made lifetime decisions based on the promises of Social Security and Medicare and we have the responsibility to make good on these promises. We can start by practicing sound financial planning…
1) Our federal government must stop borrowing from the Social Security Trust Fund to pay for current government services. Our government must live within its means and balance its budget with reduced spending. We must ensure that money paid into the system is used only for Social Security.
2) Optional investment plans should be set up for our younger Americans to opt out of the Social Security system, if they choose to do so, and achieve better returns in the private market. Countries such as Britain, Australia, Mexico, and Chile have already made the transition from failing social security systems. It will mean that you and your family would no longer depend on the promises of politicians for a secure retirement.
3) Our nation’s priorities must be changed and we need to take action now in order to finance the huge promises to our retired citizens. It is estimated that U.S. government benefits (mainly Social Security and Medicare) will rise from 9% of national income in 2005 to 21% by 2050. It has also been estimated that before it is all over, the War in Iraq will cost Americans up to two trillion dollars. This type of spending could help solve many problems here in America including supporting obligations to our senior citizens.
It doesn’t take a financial genius to determine that our country will have major difficulties making good on all the promises we have made in private and government pension and medical programs. From the City of San Diego’s $2 billion+ unfunded dilemma to Social Security, Medicare, Medical, military veterans, and public and private pension and health programs, we have made enormous unfunded promises to our citizens.
The challenge for today's generation is to find a way to keep our promises to seniors without overburdening the young. Meeting that challenge will require change, and change will require courage. The longer we ignore this problem, we will be left will little choice but to resort to large tax increases at all levels of government or defaulting on promised benefits.
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