The two coming floods ain’t due to “climate change.”

Most of this information is courtesy of The Foundation For Economic Education, FEE.com. On January 31, 1940, Ida Fuller received a check for $22.54. She was the first person to retire under the Old-Age, Survivors, and Disability Insurance (OASDI) scheme, better known as Social Security. At the time of her retirement in 1939, she had paid just $22 in Social Security taxes, then she lived to be 100 (laughing all the way?), cashing over $20,000 worth of Social Security checks.

If she had only paid $22.54 in contributions, where did the $20,000 she received in Social Security payouts come from? It came, as it does now, from the taxpayers of the day. As of 2019, your employer deducts 6.2 % of your wages up to $132,900 a year, matches this amount, and sends it to the Social Security Administration (SSA). The SSA deposits this with the Treasury, which spends it and receives Treasury bonds in return. This is the fabled trust fund that guarantees Social Security. But all Treasury bonds are simply IOUs redeemable against the income of tomorrow’s taxpayers. When one of the Treasury bonds held by the SSA falls due for payment, the Treasury can only get the funds to meet this liability by taxing, borrowing (taxing the taxpayers of tomorrow), or printing money (imposing an inflation tax). In each case, what really guarantees Social Security is not the money you paid in but the earnings of today’s or tomorrow’s taxpayers.

Such a pay-as-you-go scheme could chug along well enough as long as there were lots of workers relative to retirees. When the program began, every 100 workers were supporting three retirees. But politicians being what they are–always generous with other people’s money–the benefits were expanded. Originally intended to cover only about 50 % of all workers, Social Security was expanded even before Ida Fuller received her first check to provide benefits for dependents of retired workers and surviving dependents. In the post-war years, Social Security grew further. Disability benefits, payable as early as age 50, were added in 1956, and during the 1950’s coverage was extended to other previously excluded workers, making it essentially universal. Congress soon passed across-the-board benefit increases of 7 % (1965), 13 % (1967), 15 % (1969), 10 % (1971), 20 % (1972), and 11 % (1974). In 1972, benefits were tied to the Consumer Price Index, yielding an annual “cost of living adjustment.”

As if this expansion were not enough, in 1965, Medicare was signed into law, establishing a heavily subsidized federal health care program for the elderly. Former President Harry Truman and his wife received the first Medicare cards without paying a cent in Medicare taxes. Like Social Security, Medicare is financed by a payroll tax of 2.9 % split between employer and employee, up from 0.7 % in 1966. (If you are “self-employed”, as I was most of my working life, you have no employer to split costs with, and pay the entire 7.65% S.S. and Medicare tax). Like Social Security, that money gets paid right out to meet current expenses, which were vastly expanded by passage of Medicare Part D in 2003. And like Social Security, such a pay-as-you-go scheme could chug along well enough as long as there were lots of workers relative to retirees.

Two things derailed that. US birth rates fell from births 3.65 births per woman in 1965 to 1.80 in 2016, and life expectancy rose from 68 in 1950 to 79 today. Together, this meant ever more retirees relative to the workers supporting them. By 2017, 100 workers were supporting 25 retirees. Let’s not mention aborting MILLIONS of potential workers fetuses. Over 75 years, Social Security has an unfunded liability of $13.9 trillion.

The Medicare hospital insurance trust fund could run out of reserves in 2026. Medicare’s second trust fund, for physician and outpatient services and for prescription drugs, is permanently “solvent” because it has an unlimited call on the general fund of the Treasury—the incomes of future taxpayers. Premiums paid by the beneficiaries will cover only about 25 % of program costs; the rest of the spending is unfinanced. Medicare’s overall unfunded liability over 75 years is more than $37 trillion.

By the expanding eligibility for and hiking the benefits of a pay-as-you-go system while at the same time having fewer children to fund it, the generations preceding that child have left a fearsome financial obligation. Either taxes will go up sharply for the workers of tomorrow, lowering their standard of living, or benefits will go down for the retirees of tomorrow, lowering their standard of living. One group is going to feel pretty angry. Hey kids–millennials, Gen XYZ, whose idea was it to have fewer kids? My generation made plenty of mistakes, but we were killed the “baby boom” for a reason.

That’s just one coming “flood”. Ugh, you mean it gets worse? Do any of my readers know someone know someone suffering from Alzheimer’s Disease? Does anyone not? Just imagine what a coming burden Alzheimer’s will be. Doesn’t require much imagination…just ask a family member. THE GOOD NEWS: WELL BEFORE GLOBAL WARMING DROWNS THE PLANET, YOU’LL BE THOROUGHLY BROKE AND YOUR PARENTS WON’T EVEN RECOGNIZE YOU AS YOU RAIL AGAINST THEM FOR MESSING IT ALL UP.

BUT GOD IS IN HIS HEAVEN, SOVEREIGN OVER ALL!

Author: iamcurmudgeon

When I began this blog, I was a 70 year old man, with a young mind and a body trying to recover from a stroke, and my purpose for this whole blog thing is to provoke thinking, to ridicule reflex reaction, and provide a legacy to my children.

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