Understanding the Federal Debt and Social Security Challenges
The issue with government programs is that they often mislead recipients. Individuals may feel they are receiving benefits, but in reality, these programs can put them at risk. Time after time, well-meaning citizens are pushed into precarious situations under the illusion of government support.
Consider the example of Social Security. Generations of diligent Americans have restructured their savings and retirement strategies around this program. Why bother saving for retirement when one can rely on Uncle Sam’s support?
The workforce has been promised regular checks during retirement in exchange for mandatory deductions from wages. However, for some, this promise has already fallen short, as evidenced by the absence of a COLA in 2016. In the coming decades, the situation may worsen, leaving beneficiaries without critical support.
As former Congressional Budget Office Director Douglas Elmendorf stated in a recent op-ed in The Washington Post, “Benefits for older Americans—particularly through Social Security and Medicare—constitute the largest portion of federal spending today and will significantly drive spending growth in the future unless policy changes are made.”
“That growth is not unexpected: As baby boomers enter retirement, the number of beneficiaries is skyrocketing. In the Congressional Budget Office’s projected analysis, total federal spending—excluding Social Security, Medicare, defense, and interest on the debt—will remain consistent as a percentage of GDP over the next quarter-century. Conversely, federal debt is currently at one of its highest levels in history and is projected to continue rising.”
“As a result, adjustments to Social Security and Medicare benefits, or increases in the taxes funding these programs, will likely be necessary to maintain sustainable federal debt levels.”
The Dangers Ahead
For over 35 years, the unsustainability of Social Security has been apparent. Unfortunately, elected officials have chosen ignorance over action. This lack of accountability continues to exacerbate the problem.
The program was intended to assist citizens—an admirable goal indeed. However, lawmakers failed to factor in the moral hazards and unintended consequences, resulting in a complicated situation.
In fact, individuals might have been better prepared for retirement had Social Security never been introduced. Without its safety net, people would likely have had to prioritize saving and investing rather than spending all their income.
Now, many soon-to-be retirees are poised to realize that the safety net they relied on may actually lead to their financial downfall. After depending on Social Security throughout their careers, they may face unpleasant realities as the system falters.
Currently, each citizen’s share of the national debt stands at $57,179. When accounting for household, business, state, and local government debts, this figure rises to $203,259. Yet, the stakes are even higher…
The combined unfunded liabilities related to Social Security, prescription drugs (Medicare Part D), and Medicare have surpassed $98 trillion—equating to $828,161 per taxpayer. This presents an astonishingly heavy burden for young adults entering the workforce.
However, the political landscape makes reforming these entitlement programs daunting. Even if change were possible, the mathematical flaws in these systems suggest an inevitable collapse.
Time to Reevaluate the Federal Debt Limit
Politicians understand that promising benefits is key to their electoral success. To gain votes, they frequently offer bailouts, safety nets, and subsidized healthcare. Talk of budget cuts or fiscal responsibility typically does not resonate with the electorate, which explains why such discussions are often avoided.
The historical pattern shows that voters consistently choose to allocate funds from the public treasury to address their economic and social issues, preferring to seek solutions without personal expenditure.
People generally desire government assistance for education, infrastructure, clean energy, social programs, and more—while hoping someone else foots the bill.
The commitment to public spending is already entrenched; the reality is, there is no turning back. While individuals express concern over national debt, collectively, voters continue to demand more government resources. The expectation for something-for-nothing prevails, creating a precarious situation.
As tax revenues fall short, deficits expand, and debts accumulate, the Federal Reserve attempts to maintain stability by diluting the dollar. In this process, personal liberties are traded for government assurances, which are now becoming fragile.
According to Treasury Secretary Jack Lew, the federal debt limit will be exhausted by November 3. A last-minute compromise to raise the debt limit is likely to occur—this has been the trend in the past. Nevertheless, increases may fail to accurately address the looming crisis.
In a more ideal circumstance, abolishing the federal debt limit would be prudent. This action would signal a departure from the pretense of fiscal responsibility.
In doing so, the government could spend freely, leading to a significant shift in priorities where personal freedom and responsibility take precedence over extensive government intervention and entitlement programs.
Sincerely,
MN Gordon
for Economic Prism
Return from Abolish the Federal Debt Limit to Economic Prism
