The entire notion of entitlements based on age
requires an ever-expanding population of working contributors
and an ever-expanding economy.
If either condition isn't met, then the programs fail.
Fisher's message is clear:
our entitlement programs will fail because there is no way to raise $100 trillion
in additional taxes in a declining economy.
Charles Hugh Smith
"Please sit tight while I walk you through the math of Medicare.
...The infinite-horizon present discounted value of the unfunded liability for Medicare A
is $34.4 trillion.
The unfunded liability of Medicare B is an additional $34 trillion.
The shortfall for Medicare D adds another $17.2 trillion.
...If you wanted to cover the unfunded liability of all three programs today,
you would be stuck with an $85.6 trillion bill.
That is more than six times as large as the bill for Social Security.
It is more than six times the annual output of the entire U.S. economy.
I want to remind you
that I am only talking about the unfunded portions of Social Security and Medicare.
It is what the current payment scheme of Social Security payroll taxes,
Medicare payroll taxes, membership fees for Medicare B, copays, deductibles
and all other revenue currently channeled to our entitlement system
will not cover under current rules.
These existing revenue streams must remain in place in perpetuity
to handle the “funded” entitlement liabilities.
Reduce or eliminate this income and the unfunded liability grows.
Increase benefits and the liability grows as well.
To solve the entitlement deficit problem,
discretionary spending would have to be reduced by 97 percent
not only for our generation, but for our children and their children
and every generation of children to come.
And similarly on the taxation side,
income tax revenue would have to rise 68 percent
and remain that high forever.
...For the existing unfunded liabilities to be covered in the end,
someone must pay $99.2 trillion more or receive $99.2 trillion less
than they have been currently promised.
This is a cold, hard fact."
Richard W. Fisher
Dallas Federal Reserve
$100 trillion in unfunded liabilities is the number now,
but if spending continues rising at triple the rate of the real economy,
then that number will only grow.
If we're honest about our accounting,
then the U.S. economy hasn't grown at all since 2008; it's shrunk by $6 trillion,
a sum we have masked by borrowing and spending $6 trillion in Federal debt,
money that replaced the decline of private borrowing and spending.
...We need a national conversation about reality, not wishful thinking.
We need to grasp the nettle and talk about triage,
about conserving Social Security for those with no other sources of income,
and about devoting our scarce resources for palliative and preventive care.
The Status Quo is completely, utterly unsustainable,
but that needn't bring the nation to its knees--unless we actively insist that it does so.