Friday, February 5, 2010

Social Security, Medicare Update: Problems Start Now

I have referred to the dire warning sent out by John Lewis a few months ago about Social Security, Medicare, and Federal Spending. Dr. Lewis used a report written by a former government budget official, which was based upon current information at that time. Well, surprise, the recession has had an impact.

According to a report (here) Social Security is experiencing a shortfall in its revenue this year, many years before the last Social Security report expected. It will need to draw on the “Trust Fund” this year. The SSA won’t need much to meet its needs, but the real problem is that SSA revenue was expected to exceed it needs and add to money to the Federal Budget. So the deficit will be larger than they expected.

Further, as long as the number of workers contributing to Social Security remains less than needed to meets its needs, we will see Social Security dipping into income tax revenue and the deficit will become larger.

I am sure that there is consternation in the Treasury Dept. I am sure that BO and most of his gang aren’t paying any attention.

It doesn’t mean that the problems that John Lewis warned us about will happen that much sooner, because that mess is more dependent upon the age of the population.

What we will see is larger deficits, larger Treasury Bond auctions, more resources removed from real economic activity, slower growth, slow job growth, more recession, more made-up money being created, and probably higher price inflation.


  1. There also a smaller but significant shortfall in public pension funds.

  2. Has any historian done a study of governments of the past who have created similar problems for themselves? Have any of those governments pulled back from the slide and then recovered, at least partly?

  3. The shortfall in other pension plans is because of investment issues. I would expect more such problems.

    Burgess, I don't know or any such study. "Ominous Parallels" is the only thing that comes to mind. There are two separate issues: intellectual and economics. As an earlier post of mine indicates, I don't think the economic issues could be handled (Fancy, not Fantacy). If we can overcome the intellectual issues, we would be okay.