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Monday, October 15, 2007

The Debt Tsunami Begins: First Baby Boomer Files for Social Security

Kathleen Casey-Kirschling became the first baby boomer to file for Social Security retirement benefits today, prompting warnings from those in the know that both Social Security and Medicare are both desperately insolvent.

A Fox News report excerpt tells part of the story:
...David Walker, the comptroller general of the Government Accountability Office, Congress' legislative arm, warned the Social Security system will soon have more recipients coming than it can afford to pay out.

"We face a tsunami of spending due primarily to the retirement of the baby boom generation and rising health care costs," Walker said. "So what's happened is we've gone from 16 workers paying into Social Security for every person drawing benefits in 1950 to 3.3 to one today, and we're going down to two to one by the time the boomers retire in big numbers and that's about where it will stay over the long run.'

'We're going to have tens of thousands of baby boomers retiring every week over the next decade or so and that means that by time we get to 2017, just 10 years away, we will no longer be collecting enough payroll taxes to pay Social Security benefits,' said former Minnesota Democratic Rep. Tim Penny.

Under current law, Social Security won't have enough money to pay promised benefits in 2041 but there is another crunch much, much sooner, the result of the the federal government relying on Social Security to pay for its annual spending.

When Social Security gets payroll taxes it pays out most of the money in benefits. The rest is supposed to go into a trust fund. Instead the government has been spending the money on other government programs, and putting IOUs into the trust. When Social Security needs the money it'll turn to the government waiting for the payback. But the government won't likely have any.

'This money has been borrowed, it's been spent, and there's no easy way to put it back,' Penney said.

The loan is expected to be called in 2017, when the largest bloc of the boomers — those born between 1946 and 1964 — will be retiring. By the mid 2020s, the federal government will have to fork over more than $200 billion a year, and then it climbs to more than $300 billion a year.

At the same time, all that is money that was being used for federal programs will no longer be available, meaning everything — from education to defense to the environment — will face a financial crunch.

Walker said over the next 75 years between Social Security, Medicaid and other entitlements, the federal government will be in a $50 trillion hole.

'Social Security represents about $6.4 trillion of that. Medicare represents $32 trillion of that. The surprising thing is that Social Security is the easy thing to fix,' Walker said. Fifty trillion dollars, to put it in perspective, is 95 percent of the estimated net worth of every American including every billionaire. Fifty trillion dollars is $440,000 per American household.'

For years, lawmakers on Capitol Hill, as well as the Bush and Clinton administrations, have been making alternate proposals for saving Social Security. They include raising taxes, reducing spending, limiting benefits or delaying the retirement age.

Walker noted that despite the term 'entitlements,' which comprise about 62 percent of government spending, government payouts are nowhere guaranteed in the Constitution.

'That 38 percent (of discretionary spending) represents all of the main functions outlined by the founding fathers of the United States for the federal government in 1787, and yet that 38 percent is being squeezed every year by mandatory spending programs,' Walker said."
So is Congress putting is the issue of Social Security rescue and reform on the front burner? Heck, no. The key committees with jurisdiction over the insolvent Social Security and Medicare systems, Senate Finance and House Ways and Means, have instead spent their time this year adopting an underfunded SCHIP expansion. And, although President bush put Social Security on the top of his domestic priority list for his second term, matters weren't any better when the GOP ran the House and Senate.

One gets the strong impression that all Congressmen and Senators know how to do is spend, spend, spend.

Here are the websites of the two committees:

Committee on Ways & Means, U.S. House of Representatives

United States Senate Committee on Finance

Call or write their memberships and ask them why they supported expanding SCHIP beyond what's needed to keep current benefits while Social Security and Medicare are insolvent. And ask them when they plan to start earning their paychecks and very generous benefits by tackling the joint Social Security/Medicare funding crisis. Few domestic issues are more critical to the American people.
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Posted by Amy Ridenour at 10:48 PM

Copyright The National Center for Public Policy Research