By Joe Hoft
Social Security and Medicare are underfunded by $175 trillion. The nightmare arrives.
In 2014 I published my first book while I was in Hong Kong. This book focused on the insane policies of the Obama/Biden regime and offered solutions that were working overseas.
The biggest problem on the table was the massive amount of unfunded liabilities that were being created under the Biden regime. Below is what I wrote at that time (pp. 23-24).
Even more alarming than the US’s annual deficits or federal debt burden is the amount of its unfunded liabilities. Unfunded liabilities are financial promises made with no money held in reserve to support these promises. For-profit organizations (e.g., companies or corporations) or not-for profit organizations (e.g., charities) must report the amount of liabilities or promises they have made that are outstanding. For example, if you have promised your employees that they will receive a pension upon their retirement, then you must report this in your financial statements. In addition to reporting, a prudent company will set aside funds to pay for these promises when they become due. Companies may be legally prevented from taking money from the assets set aside for some of these obligations, and if a company or organization does not set aside adequate assets to support their liabilities, the organization could go bankrupt and face litigation as a result. Unfunded liabilities are a cause for concern in a company or corporation and a severe red light for anyone reviewing a company’s balance sheet to determine its financial solvency and business practices.
The US government does not have to abide by these reporting and reserving measures. The government does not have to provide in its basic set of financial statements the amount of its total liabilities, the bulk of which are currently unfunded. Also, it does not have to set aside assets to fund the obligations it has promised. As of the end of 2012, the actual liabilities of the US federal government— including Social Security, Medicare, and federal employees’ future retirement benefits—were estimated to exceed $86.8 trillion, or 550% of annual GDP. In addition, for the year ending December 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. This means that these programs are adding $7 trillion annually to the US debt load but this $7 trillion is not counted in the amount of growing US debt or accounted for in its annual deficits. At the current rate, the US will have almost $100 trillion in financial debt and promises due at the end of 2014, but the public will only know about the small portion of this amount, the already massive $17 trillion in debt outstanding.
In late 2012, over 80 CEOs from some of America’s largest corporations encouraged Congress to reduce the amount of US debt. While the US currently borrows at record low interest rates, the concern is that this will change. This was the main concern of the individuals who attended the “Tea Party” rallies beginning in 2009. Many Americans were alarmed at the increases in federal government spending.
This was a warning. There are great ideas that other countries have in place that are much better than the programs in place in America. Instead of listening, the can got kicked down the road.
Today the amount of unfunded liabilities has increased astronomically as expected. Daily Mail reports today:
Medicare and Social Security are in crisis and face significant challenges according a report from the U.S. Treasury Department which indicates the programs are both underfunded to the tune of a $175 trillion.
The report suggests that if the current trends continue the programs may not be around when the current generation of American children reach retirement age unless substantial changes are implemented.
Projections suggest that Medicare and Social Security may struggle to meet full benefit obligations within the next decade, with factors like inflation and economic output adding strain due to insufficient funds coming in to support these programs.
The situation is dire and America’s politicians put their heads in a hole and run in fear. There are no solutions coming from our politicians.
See “Falling Eagle, Rising Tigers” for solutions to America’s problems from the Far-East and Asia Pacific.