As you're probably aware, the National Commission on Fiscal Responsibility and Reform submitted its report last week (link is to an Adobe Acrobat document in .PDF format). There's been a lot of discussion about it, particularly the fact that the Commission could not muster 14 of its 18 members to vote for its report (which would have meant that it would go to Congress for approval). Because only 11 approved it, the Commission's report will remain a document for discussion rather than a potentially binding solution to our fiscal problems.
That said, I think the Commission got a lot right in its report. In particular, it wasn't afraid to tackle the problem of entitlement spending. Social Security, Medicare and other entitlement programs have got to be cut. There's simply no alternative. One way or another, it's going to happen, even if politicians shy away from touching these programs in the short term.
As the indispensable Karl Denninger points out:
At the end of the day you can't solve this problem without going after entitlements.
Why? Because that's where the spending is.
There it is on the deficits. Here's the picture on funding:
Now where's the spending going?(Click the image above for a larger view)
Overlay them and then tell me how we close that gap without massive spending cuts. And there's only one place to get them - from entitlements.
. . .
There's no hope for this in the intermediate term folks. We're not going to get to choose how this gets resolved. We're going to have it forced on us, and it's going to come in a form and fashion that will destroy - literally - the lowest-income 20% of this nation and severely injure the next 50%.
You can't tax your way out of this. You also can't simply cut back on discretionary spending adds.
You have to address the primary problem, which is Medicare and Medicaid, along with (next) Social Security and (next) welfare programs.
That's where the problems are, and nothing we can do about it will change this. We only get to choose whether we do this on our terms in the near future, or on someone else's terms in the not-much-further down the road future.
There's more at the link. Bold print is my emphasis. Italic print is Mr. Denninger's emphasis.
We've been given the cold, hard, uncomfortable truth by the Deficit Commission. Will our politicians have the courage to grasp the nettle of entitlement spending, and trim it back to manageable proportions? And will the American people, many of whom have come to rely on entitlement handouts, be willing to accept the painful fact that the gravy train's running out of gravy, and they'll have to make do with less?
My expectations aren't very high that either eventuality will occur . . . but according to the President, there's always hope, right?
*Sigh*
Peter
First step (IMO) would be to stop inflation at the Fed, so that the payments into the system have some chance of resembling the payments coming out of the system. As it stands now, people turning 65, when they started working 50 years ago... well, I'm sure you're as aware as I am that the 7.5% of their paychecks back then have nothing on what they're going to get today.
ReplyDeleteSecond step, you have to raise the retirement age to reflect the longer lifespan people have now. in 1950, there were 16 workers for every retiree. Now we're down to a 3:1 ratio. Reversing that trend would be a good step.
All of that assumes that one wants to salvage social security. I, for one, would prefer the government to not indulge in such wealth redistribution schemes, but I suspect "reform" is going to be a much easier package to pass than "abolition".