Generational Warfare

Old-age entitlements vs. the safety net

(Page 3 of 4)

Medicare is health insurance for all people who are 65 years or older, along with a subset of younger people who suffer from dialysis-requiring kidney failure and a few other disabilities. The program costs $560 billion a year and serves around 49 million people. Medicare benefits break down into four distinct parts. 

Part A, “hospital insurance,” covers in-patient stays in medical facilities (including nursing homes and some home care) and generally does not require any sort of premium payment from beneficiaries. Part B is “medical insurance,” designed to replace coverage that seniors used to get through their jobs. Recipients pay a premium that ranges from $99 a month for individuals with adjusted gross incomes under $85,000 (95 percent of all recipients) to $320 for those pulling in $214,000 or more. Part C is a voluntary program, also known as Medicare Advantage, in which beneficiaries enroll with government-certified private insurers who in exchange for a flat monthly fee from the feds provide the same coverage as Parts A and B, typically throwing in extras not covered by standard Medicare, such as vision, hearing, and dental programs. Depending on various factors (such as whether the operator runs a health maintenance organization or a preferred provider organization, whether the insured wants drug coverage or no deductibles, etc.), Medicare Advantage may charge fees on top of the basic premium. Finally, Medicare Part D, which took effect in 2006 under legislation passed as part of the Medicare Modernization Act in 2003, covers prescription drugs. Premiums for drug coverage, which has a mandated annual deductible of $320, start around $25 a month and vary based on the patient’s income, needs, and preferences regarding deductibles vs. co-payments.

When Social Security first started cutting checks, America was still in the throes of the Great Depression. Retirement was a rare and wonderful thing, as most people worked pretty much until the day they died (the average life expectancy at birth was 47.3 years in 1900; 68.2 years in 1950s; and 78.5 years in 2009). When Medicare was created, seniors were more likely than the average American to be poor. Although neither of those things is true anymore, spending as a percentage of federal outlays on both programs continues to grow and shows no signs of slowing down.

Because it is on automatic pilot, spending on entitlements can grow without political consequence or fiscal conscience. Between 1975 and 2000, spending on all entitlements grew at an average annual rate of 3.96 percent, while annual GDP growth was 3.27 percent. Then the ratio really started to deteriorate: Between 2000 and 2010, entitlement spending grew 5.3 percent a year while the economy managed just 1.81 percent. The Great Recession has added a bit to that disparity (Medicaid rolls tend to swell during downturns), but it’s far from the whole story. The aging of the population and the expansion of Medicare to include prescription drug coverage—at a cost of $338 billion from 2006 through the end of 2011—are the major reasons entitlements grow faster than the economy. And given that the oldest baby boomers are turning just 66 this year, we haven’t seen anything yet.

Who Pays?

Social Security and Medicare are paid for through a combination of specifically earmarked payroll taxes, general tax revenue, and borrowing. Under the Federal Insurance Contributions Act (FICA), most workers pay 6.2 percent of their earned income in taxes earmarked for Social Security payouts to current beneficiaries (a rate that has been temporarily reduced to 4.2 percent as a means of “stimulating” the economy). Employers kick in another 6.2 percent to the same fund. Over the years, the amount of gross wages subject to the Social Security tax has been adjusted upward; in 2012 it maxes out at $110,100. FICA also levies a tax of 2.9 percent (split equally between employee and employer) to cover a portion of Medicare. The Medicare tax is not subject to a regular compensation limit and is applied to every dollar of wages.

Theoretically, total contributions to Social Security are designed to cover the full cost of the program. That is, the usual amount of 12.4 percent in payroll taxes paid by workers and employers should provide enough revenue to pay for current and future outlays. Historically, Social Security has had far more people paying into the system than drawing funds from it, so the program amassed a surplus in its trust funds that since 1983 has been automatically invested in a mix of short-term and long-term government securities. But those favorable demographics have changed dramatically.

In 1940 there were 159 workers for each beneficiary. Today there are fewer than three. Last fall Mitt Romney, whom the Obama administration accuses of wanting to “dismantle” old-age entitlements, attacked Texas Gov. Rick Perry during a Republican presidential debate for calling Social Security “a Ponzi scheme,” a scam in which current investors are paid profits from new investors, not out of actual returns. “The term Ponzi scheme is over the top, unnecessary, and frightening to many people,” Romney said. That may all be true, but it doesn’t change the reality that current workers are indeed paying for current retirees, not for their future selves, which means that as the number of contributors falls, payouts cannot continue at the same rate. The only options are to reduce benefits, increase contributions, or some combination of both.

While life spans have increased and birth rates have decreased, Social Security’s revenue has not been able to keep pace. In 2010 Social Security entered into a permanent cash-flow deficit, meaning annual payroll tax revenue is no longer sufficient to cover annual benefits. (The last time this occurred was in the early 1980s, when Congress responded by gradually raising payroll taxes and the eligibility age.) For now, benefits therefore must be partially covered by interest income from the assets in the trust funds. After 2021, Social Security will have to cash in the trust fund assets—currently around $2.7 trillion—to pay full benefits until the trust fund is exhausted.

In 2011, according to the most recent report from the Social Security trustees, released in April, Social Security raised $691 billion from payroll taxes and general revenue while paying out $736 billion in retirement benefits. The $45 billion shortfall was covered by money in the plan’s various trust funds. The Trustees’ Report projects that at current tax rates and benefits levels the trust funds will be completely exhausted by 2033. That’s three years earlier than the projections made in 2011 and seven years earlier than projections from 2006. The day of financial reckoning is approaching with accelerating speed. And that situation hasn’t been helped by the temporary two-percentage-point cut in payroll taxes Congress enacted in December 2010 to let Americans keep more of their money during the economic downturn, since Congress refused to offset the reduced revenue with benefit cuts.

Current law holds that when the trust funds are depleted, benefits must be cut to the level of payroll tax revenue. As it stands, that would amount to a 25 percent haircut or, in current dollars, $307 off the average retirement check of $1,229. Compounding the problem is that the government has already spent the Social Security surpluses to pay for other expenses. Absent tax increases or benefit cuts, all operating deficits will not actually be covered by past savings but by new borrowing.

Medicare’s finances are in even worse shape. Costs are rising more quickly, and, unlike the Social Security levy, the Medicare payroll tax was never designed to fully cover benefits. Currently only one-third or so of Medicare costs are covered by payroll taxes, a fraction that will get smaller over time. All told, payroll taxes, along with dedicated funding sources such as premium payments, state transfers, and taxes on benefits, cover around half of all Medicare costs. The rest comes from general tax revenue and borrowing.

Looking down the road, the picture is bleaker still. According to the most recent trustees’ report, the Medicare hospital insurance (H.I.) trust fund will run out of assets in 2024. As with the Social Security trust funds, if the H.I. fund is depleted, Medicare will by law be able to pay out in benefits only what the program collects in taxes.

Even though payroll taxes aren’t enough to fund Medicare and Social Security, they impose a major burden on workers, especially younger workers, who are likely to make less money and thus pay a higher percentage of their income to support retirees who are already as a group more affluent.

Underfunding the Future

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  • sarcasmic||

    tl;dr

  • Caleb Turberville||

    Speaking of people with delusional personalities brought upon by an intense desire to imitate popular culture, does anybody want to tell Gillespie that the Beats lost and "the Man" prevailed?

  • Caleb Turberville||

    Yep, he quotes pre-electric era Dylan in both the opening and closing paragraphs.

    Just wait until he hears Bringing it All Back Home!

  • Pound. Head. On. Desk.||

    Lovely how you agree with yourself. Must save argument.

  • Pound. Head. On. Desk.||

    Look again. The Beats became the Man.

  • Caleb Turberville||

    As evidenced by Dylan's "born-again" period. Incidentally, Slow Train Coming was recorded in my home area.

  • Zeb||

    Yeah, either that or he is a big Bob Dylan fan.

  • AuH2O||

    Will the Baby Boomers do the right thing?

    Of course not. When have they ever?

  • ||

    That would require them to think they were doing something wrong in the first place.

  • Bobarian||

    ^^THIS +1000

  • Dividist||

    Now I feel guilty.

    As a Boomer, permit me to take this opportunity to step up, do the right thing, and publicly express the appreciation of all my generation to all you young'uns. Thank you for carrying the financial burden of healthcare for all of us fat-ass aging Boomers on your backs for most of your working life over the next 30-40 years.

    Now I know you "generation x","y","z", "millies", or whatever you call yourselves are the very generations that put Obama in office, are by extension responsible for and disproportionately support Obamacare. Since we Boomers will be the primary beneficiaries consuming the lion's share of the costs and expenses of Obamacare, Medicare, etc. and the increased burden of paying for the ACA mandate/tax, Medicare and the rest will fall on you, well... all we can do is sit back, offer our thanks and this one bit of advice:

    Don't tell anyone, but it really is a Ponzi scheme and like all Ponzi schemes, will only work for as long as more new suckers can be found to "invest" so that older "investors" can cash out at a "profit". To be clear: That would be us Boomers cashing out with your new "investments".

    So here is our sage advice for you poor young suckers - You need to get real busy making lots and lots of babies. As many as you can as fast as you can. You are going to need a lot more of them if there are going to be enough in the next generation to support you as you will be supporting us.

    In the meantime, thanks again!!!

  • Imanalterego||

    Oh, yeah, baby.
    The Whiner generations behind us simply would like to point out that we did not do enough for them.

  • tarran||

    A quibble:

    Retirement was a rare and wonderful thing, as most people worked pretty much until the day they died (the average life expectancy at birth was 47.3 years in 1900; 68.2 years in 1950s; and 78.5 years in 2009).

    The life expectancy at birth is an inappropriate statistic; Life expectancy at age 18 would be far more appropriate as people who die before they enter the workforce are irrelevant from a SS perspective.

    Moreover, it's important to understand what a Life expectancy is: it merely states the age at which half of a population is going to croak.

    So if you look at the life expectancy of 40 year old ex-MLB pitchers, and arrive with a number like 80, it means that half the people won't make it to their 8-th birthday and half will.

  • mad libertarian guy||

    But didn't you know that before the New Deal all children were forced to work from birth by their capitalist, monocle wearing robber barons?

  • Almanian's Evil Twin||

    Good times, good times...

    *reminiscing*

  • Tulpa the White||

    Life expectancy is a mean, not a median. So it is not the age at which half the population has already croaked; in this case outliers skew the mean downward as compared the median.

  • DxRachel||

    No, Tulpa, life expectancy is NOT a mean. Tarran is correct, that life expectancy at birth is the age at which you're more likely to be dead than alive, given that you were born. Life expectancy at, say, age 50 is the age at which you're more likely to be dead than alive, given that you made it to age 50.

    Please note that, until the age of sanitation, *most* human beings born died when they were still children. In many places without clean water and such, they still do. Obviously, this drives down life expectancy at birth, while having only a limited effect on life expectancy at age 50. So this is why, despite having a life expectancy at birth of about 38 in the US in 1776, our nation's founders could set the minimum age to be president at 35. It's NOT the case that 35 was super elderly in 1776, as is evidenced by the age at death of most of the Founding Fathers. It IS the case that tons of children died in 1776.

    (Btw, I teach epidemiology. Breaking students of their commonsense understandings of the phrase "life expectancy"--misunderstandings that Nick Gillespie and Veronique deRugy have, as does Tulpa--is something I have to do all the time.)

  • Smack MacDougal||

    Your belief is wrong. See below.

  • DxRachel||

    Smack, how do you think the "*expected* average number" is calculated? While I agree that your neatly copied and pasted definition has the word "average" in it (though I note you omitted Wikipedia's "(in the statistical sense)" following the word "expected" in your CP), "average" can mean lots of different things.

    Life expectancy at birth is NOT calculated by adding up all the years all the individuals born that year lived, and then dividing by the number of individuals in the population. Indeed, that would be sort of a trick, since it would involve knowing when everyone born in a given year was going to die.

    Instead, life expectancy calculations are probability calculations. (This is what "expected (in the statistical sense)" means.) We don't need to know when all babies born this year will eventually die to calculate the life expectancy at birth (2012), because we know the probability that in 2012 that any given baby will die in year one of life. (And we have this probability information for year 2, year 3, and so on.) Look up "actuarial tables" for more information on how that's done.

    We can then combine those probabilities to answer questions like: "given that you were born in 2012, at what age are you more likely to be dead than alive?" and "given that you had already made it to age 65 in 2012, how many years are you expected (in the statistical sense) to have left"? That's what "life expectancy" means.

    Btw, Smack, this isn't my "belief." It's my actual job.

  • Tyler Durden||

    The point is: life expectancy at birth is primarily a function of infant mortality, which is irrelevant when discussing retirement ages. Someone born in the U.S. in 1900, who lived to age 20, could expect to live to average age 65.6, not 47.3 as suggested in this article. I agree with the rest of the points made in the article, but this issue of people misunderstanding the difference between "life expectancy at birth", versus "life expectancy at adulthood" is a particular bugbear of mine.

  • ||

    Actually, it seems to me that for retirement and healthcare purposes the most appropriate number is Life Expectancy at Age 65 Years.

    Geezers who make it to sixty-five seem to have an awful knack for hanging on long past that Life Expectancy at birth number.

  • TommyTone||

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  • Smack MacDougal||

    Life expectancy is the expected average number of complete years of life remaining, excluding fractions of a year, at a given age.

  • Whiterun Guard||

    Looks like Gillespie still hasn't learned that there's no hole we can't spend ourselves out of.

  • R C Dean||

    This country has a number of fault lines that have been papered over with debt-funded entitlements. When the money runs out (and it will, it will), we can expect to see all sorts of social conflict.

    Pubsec v Prodsec
    Old v Young
    Takers v Makers

  • Palin's Buttplug||

    The Tea Party (aka the Medicare Preservation Society) embodied this conflict with their opposition to health insurance reform.

    The Sarah Palins of the world kept calling cost controls "death panels".

  • mad libertarian guy||

    Of course those "cost controls" would be better off were they performed by private insurance companies who are NOT being forced to insure everyone in America whether they can afford health insurance or not, for patients who are paying them for the specific service of providing payment for their medical care.

  • Palin's Buttplug||

    No, IPAB was strictly a Medicare cost panel.

    We need that. I get fucking angry when I see those ads for "free" $8000 scooters for Medicare patients.

    Score one for POTUS.

  • Tulpa the White||

    BO was very brave to go on TV and demand that we stop giving people free shit that they don't need on the taxpayer dime.

    Or maybe that was a dream?

  • Palin's Buttplug||

    Watch what they do and not what they say.

  • Palin's Buttplug||

    So you chose the most cost effective life-saving device to make a point?

    Scale it 100-1. A stent is a 99-100 in value and an $8000 scooter is a 1-2. We should work on the least value quintile.

    Why approve a liver transplant for an 85 year old hepatitis victim? That would be an appropriate question.

  • Tulpa the White||

    Maybe the private sector should be dealing with that question then. Via contract law, etc.

  • Palin's Buttplug||

    I don't care if Medicare recipients pay for anything privately.

    The discussion is about Medicare and cost controls.

    Private insurers are free to control costs anyway they like with the exception of rescission.

  • some guy||

    The best way to control Medicare's costs would be to get rid of Medicare. Non-existent programs tend to be very nearly free.

  • mad libertarian guy||

    Now that their every move is being controlled by government bureaucrats they aren't "free" to do anything at all except for exactly what the government tells them to do.

  • ||

    So what would you call it when a bureaucrat in HHS uses cost controls to deny you a stint after your heart attack?

  • Palin's Buttplug||

    (see above)

  • Tulpa the White||

    Should we approve a guy with a stomach virus getting a porterhouse steak, when he's just going to puke it up anyway?

  • ||

    Death Panel is just a flashy thing to call the douchenozzles who dole out what medical care you can get based on "cost controls".

    But you're right in saying fuck you to the TPers trotting their signs about leaving medicare alone.

  • tarran||

    My next comment:

    Take the 12.5% of your income that goes into SS.

    If you were to stick that in an IRA, conservatively earning 5% interest over 40 years.

    And, at the end of the 40 years, draw 4% of the principal as an income. You would have an indefinite income stream of approx 60% of your original income.

    Social security sucks because it is 'invested' in govenrment bonds which thanks to the price-controls established by the fed, produce very little income.

    The argument against investing social security into the stock market is that the government then becomes the biggest stockholder and the U.S. would become an outright fascist state very rapidly under such a regime.

  • Palin's Buttplug||

    You're correct on that.

    But the $5 trillion in the SS Trust Fund would be exhausted in six years or so.

    What would pay SS benefits after that?

    Would you drop 53 million cold-turkey?

  • Ptah-Hotep||

    Would you drop 53 million cold-turkey?

    Yes. They are the ones that voted for the benefits without voting for the taxes to support them.

  • Palin's Buttplug||

    Can't dispute that.

  • R C Dean||

    Anyone who uses "SS Trust Fund" non-ironically is, shall we say, credibility-challenged.

  • Palin's Buttplug||

    US Treasuries are the soundest investment around.

    Now in 2035 will they be? We don't know but if not we will have worse problems than poor returns.

  • Tulpa the White||

    US Treasuries are the soundest investment around.

    A plugged toilet raises all turds.

  • Coach Panto||

    Thanks for the mirth. Cracks like this keep me sane.

  • R C Dean||

    US Treasuries are the soundest investment around.

    Keep digging, shrike. US Treasuries held by the US government aren't an investment at all, anymore than the IOU I wrote myself for twice my annual income is an investment.

  • Tulpa the White||

    To be fair, as long as there are new suckers investors buying them, it is a sound investment. Nobody knows when the music's going to stop playing, though.

  • Drake||

    I guarantee the Fed will be around to pay off your T-Bill with freshly printed cash.

  • The Fatman||

    Of course a can of cat food will cost $10G, but hey at least you got your money back right?

  • DarrenM||

    As long as the feds can extract ever more money from the proles, it's a sound investment.

  • Lost_In_Translation||

    It would revert to a regular entitlement that the government would just have to figure out how to fund.

  • some guy||

    This is probably the best (only?) solution. The gov't would quickly learn that means-testing is the only possible path forward. A lot of people would get screwed in the process, but they can afford it and they made the decisions that brought us to this, so they also deserve it.

    Us younger folks would still be stuck with the bill, but it would be considerably smaller.

  • mad libertarian guy||

    This is probably the best (only?) solution. The gov't would quickly learn that means-testing is the only possible path forward. A lot of people would get screwed in the process, but they can afford it and they made the decisions that brought us to this, so they also deserve it.

    Us younger folks would still be stuck with the bill, but it would be considerably smaller.

    ^^THIS^^

    That I'm being held liable for decisions made on my behalf decades before I was born is fucking bullshit.

    Fuck the old fucks who are trying to hold me responsible for paying off their obligations.

  • Cloudbuster||

    You also should "fuck the old fucks" who are responsible for the decisions made on your behalf in the U.S. education system, for creating a system that produced a lot of people who can't express themselves publicly without four profanities in two sentences.

  • DarrenM||

    This would just remove the deception, which is a big step in the right direction.

  • ||

    What would pay SS benefits after that?

    If SS as a universal entitlement regardless of income were phased out, the declining number of beneficiaries would have to be paid out of general revenues.

    The time to have phased out SS and Medicare as a universal entitlement was twenty-five or thirty years ago when the cracks first started showing.

  • $park¥||

    The only thing I can take away from this article is that reason is going to be held responsible when some old lady starts killing people.

  • JimVooo||

    Thats kinda crazy when you think about it dude.

    www.fun-anon.tk

  • T o n y||

    Taking away Social Security and Medicare from only old people who don't need them will save practically no money. Everyone else needs them.

  • mad libertarian guy||

    $

  • T o n y||

    Baaah baaaah.

  • mad libertarian guy||

    Hold the fuck on. The entire article is about how the elderly are by far the richest demographic in the US, and that the young are the poorest, and have been getting progressively poorer and poorer for decades, yet your argument is that I'm the fucking sheep because you assert that most for those on SS "need" it?

    Go fuck yourself.

  • sarcasmic||

    need != want

    Not that you're big on distinctions, but I thought I'd point it out.

  • T o n y||

    What does "need" mean to you?

  • jacob the barbarian||

    I need to kill you

  • mad libertarian guy||

    Without it I will, without question, die.

    One needs air. One does not need a fucking SS check after having the opportunity over the course of an entire lifetime to save some of what they've earned.

    Fuck you.

  • some guy||

    Medicare recipients are the richest group of people out there.

    http://www.moneyrelationship.c.....you-stand/

  • Coach Panto||

    "Tony", I like that you make no attempt to qualify or quantify an assertion that is utterly senseless without one of those.

    Why don't you just say, "reducing taxes won't save money", or "finding shelter won't keep you dry".

    You sir, an addle-brained sophist who is too lazy to complete a thought. You probably still shit your pants just because you're too lazy to get up. It's clear you have no agenda other than to distract or annoy people. You certainly can't make a coherent argument. Why don't you take a month off from posting and try to actually learn what an argument is, and then come back and make one. It would be so much more interesting to the other people than what you currently do.

  • Marty Feldman's Eyes||

    Time for a remake of Wild in the Streets?

    'Cause I just saw it for the first time, and even granting that it's a "cult" film, it's just a really bad movie.

  • EDG reppin' LBC||

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  • Barack||

    My whole life I was told to go to school, get a job,save my money , buy a house, make it nice, send my kids to nice schools, and when retirement came along better not count on the government. Social Security would probably be history. I'm 53 years old,self employed, Evil Rich because I have money in my pocket. Fuck Everyone. I didn't start that way. Get a job and work your ass off just like the old man.
    Generation Gap My Ass. Get to work.

  • Lost_In_Translation||

    Who are you yelling at? Should I get off your lawn?

  • Barack||

    Kids these days...

  • Rasilio||

    Lol you know, my father worked his ass off too. He was a smart but ignorant Hogh School Dropout (not as a put down but the literal meaning) but you would never find a harder worker until untreated PTSD from 4 tours in Nam plus agent orange related COPD finally destroyed his ability to work and even still with him being effectively "retired" he spends all his time working on his house. What's he got to show for it? Not a damn thing, he lives off of a VA disability pension.

    Hard work is far from a guarantee of success. This is of course not a call for government intervention, there is no reason why hard work in and of itself should be a guarantee of success in life if for no other reason than being creativly lazy leads to more new discoveries than perspiration ever has but it also means we need to understand that the overwhelming majority of "poor" people were hard workers and their poverty does not make them disposable once they cannot effectively work any longer.

  • goneGalt||

    My whole life I was told to go to school, get a job,save my money , buy a house, make it nice, send my kids to nice schools, and when retirement came along better not count on the government. Social Security would probably be history. I'm 54 years old,self employed, Evil Boomer because I don't have money in my pocket. (47% Tax on earnings)Fuck Everyone. I didn't start that way. Get two jobs and work your ass off just like the old man.
    Generation Gap My Ass. Get to work(and stop taking my earnings).

  • Coach Panto||

    This entitlement mess is going to lead to a dollar crash.

    Going Galt:

    1. Pull capital investments an go into gold or commodities that hold value, including ones you can take possession of and secure.

    2. Retire early and work for cash only if you can.

    1. Barter. Anyone producing a commodity or providing a service can barter. Build a large stock of commodity or save up a few months expense $ while making long term barter arrangements with other producers/providers. Then downsize the retail side and transition to 75% barter.

    4. Get out of blue states and set up your barter system in smaller towns in red states.

  • goneGalt||

    #1
    Good advice, I'll need to investigate a reliable dealer for physical PMs.

    #2 and #3
    I've made a small start in the cash/barter direction. I guess I need to see if I can promote more business of that sort. Don't know if I can get to 75%.

    #4
    I'm looking at Florida. Redder than CT and no state income tax. Lower property values and taxes too.

  • mad libertarian guy||

    In Florida you will get fucked on insurance, both car and home. Make no mistake; as soon as they possibly can, property values will rise dramatically as will your property taxes.

    My tax burden on a small, 690 ft^2 condo in Miami was, 10 years ago, about the same as my property taxes are now. Except that now I live in KY and have a huge house on 5 acres.

    Don't let the no income tax in FL fool you. Despite not having an income tax, the tax burden is still far more than in states like KY, which does have an income tax.

  • goneGalt||

    I appreciate the advice. FL seems to be similar to New Hampshire(which I have not ruled out) in that way.

    But I'm looking at mobile homes and inland condo's at about $25-35K. RE taxes are $600 - $700/yr. The taxes could go up 11X and still be less than what my landlord pays today. And hers will be rising too if property values rise.

    I lived in FL 30 years ago. Between bikes, buses, cabs, and friends I got by without any car. The rain was no fun, but I did not have to deal with Winter's ice and narrowed roads.

    Still, I will be sure to give KY a look. But I suspect my total tax and transit costs will be higher there.

  • BikeRider||

    Gillespie/de Rugy make some logical errors in their attempt to blame it on the Baby Boomers.

    They by asking if the Boomers will "stop sucking up more and more money from their children and grandchildren." Then they present statistics about how "people 65 and older have much lower poverty rates than most other demographic groups".

    These are NOT the Baby Boomers. The Boomers are between 66 and 48. Only the oldest Boomers fall into the wealthy over-65 group. Most over-65's are parents of the Boomers.

    There's no reason to assume that Boomers will have the same wealth as their parents who built much of their wealth in real estate appreciation and defined-benefit pensions. Their children are less likely to experience those gains. Furthermore, the Boomers are paying higher Soc Sec taxes than their parents did. In other words, it's the pre-Boomers who are "sucking up ... money from their children ..."

    That doesn't mean Boomers are blameless. They may have been dealt a bad hand but, in spite of decades of SS insolvency warnings, most have done little to prepare for retirement. I predict more of the Boomers will "need" Social Security.

    I also predict that they'll turn those decades of warnings around to blame the government: "You've known all along that the system was broken, you did nothing to fix it, but you kept taking my money. You owe me."

    It's not the Boomers fault yet, but there could be riots when the Boomers really do retire and the $$ aren't there.

  • Lost_In_Translation||

    rioting is for the young. I predict a withering editorial writing campaign followed by complete political submission to boomer will (200% GDP debt). Then, the young will riot.

  • Dovahkiin||

    Like we will have time to. Those of us who have actually managed to find/keep a job will be too busy trying to feed our families with our meager after-tax incomes.

    Seriously, who the fuck has the time to 'riot?'

  • DRM||

    The ones who haven't managed to find/keep a job.

  • Dovahkiin||

    I should have completed my thought.

    Those that will have time to riot, will be rioting for more free stuff, and demanded they be taken care of as well.

    We're boned!

  • DarrenM||

    OTOH, those with money can buy bigger guns.

  • Loki||

    rioting is for the young

    And voting is for the old. I predict you're correct wrt the "complete political submission to boomer will" since those are the people who will vote in large numbers for pols who promise to keep the gravy train going.

  • ||

    I'd have to see evidence that any boomer has ever based his vote on a pol voting to continue SS as is. No boomer I know does. In fact, most of the boomers I've been approaching retirement age with had the same fears that SS would be insolvent before they reached retirement age as all the young'ns here seem to.

    That is something that "greatest generation" voters did even when the proposed reform promised to not reduce any benefits being paid to current recipients or those close to retirement age.

  • BikeRider||

    I don't know... George Costanza might disagree with that assessment...

    http://www.youtube.com/watch?v=csuZHyW-iGI

  • Tonio||

    Uh, the boomers have been dealt the best hand in history. The problem, and it's not their fault, is that there are so damn many of them that when they hit peak retirement (number of retirees maxes out before they start to die in significant numbers) that an ever-decreasing workforce (punks, Gen-X and younger) will be left to support them.

    And this is really going to suck for the tail end of the boomers and for the punks. Because at some point they're going to stop building more nursing homes and there will be waiting lists.

  • DRM||

    The problem, and it's not their fault, is that . . . an ever-decreasing workforce will be left to support them.

    No, it pretty obviously is their fault. They could have averaged four children per woman, but they chose not to have them. Now those kids aren't around to support them. The math is of their own making.

  • Concerned Citizen||

    No, the math is of the Federal Reserve's and Congress' making. Inflation and taxes since 1914 have created the two parent family, with one or two children raised in daycare.

  • Concerned Citizen||

    I meant - created the two working parent family.
    LBJ created the one parent family.

  • DRM||

    Bullshit.

    Baby Boomers lived lives that were substantially more luxurious than the lives of their parents, whether you're talking average house size, average cars per family, number of televisions per household, et cetera. They could have had less luxurious lifestyles with the extra money going into extra kids (or extra retirement savings), but they chose otherwise.

  • Cloudbuster||

    Tail-ender (born 1963) here. Five kids. For most of our lives, a single-income family.

    It's always been possible. People show what they value by how they spend their time. Most boomers didn't value their kids.

    Payback's a bitch.

  • Imanalterego||

    Hah. I was foolish enough to buy into the ZPG bullshit. "We're ruining the planet with too many people! Have only enough to replace yourselves." It was all a scheme to screw over the next generations, eh?

  • BikeRider||

    "boomers have been dealt the best hand in history." When it comes to retirement, I respectfully disagree.

    Real Estate: http://www.census.gov/const/uspriceann.pdf
    From 1963 to 1993 the median price of a new home increased just over 700%. From 1973 to 2003 it increased 600%. From 1980 to 2010 it increased about 340%. Maybe real estate will bounce back and the Boomers will see the same appreciation that their parents had, but it's not likely.

    Social Security Tax Rates: http://www.ssa.gov/oact/progdata/taxRates.html
    The Boomers are paying much higher SS tax rates than their parents.

    I'm not allowed a third link, but there are many articles on the shift to defined contribution pensions. Most Boomers are stuck with whatever their 401K/403B returns. The return on major indices over the last 20 years has been mediocre. The 10 year return is pretty good because we were in a recession in 2002 but the 5 year return is negative.

    As for the nursing home situation. I'm a late Boomer (49) and I'm hoping it works in my favor. Maybe the older Boomers will die off leaving a glut of available rooms at bargain prices.

  • ||

    Thank you, BikeRider. The people who have been fighting any kind of changes to SS and Medicare for the last thirty years or so have been the "greatest generation" who began retiring in the 1970s and who benefitted from payouts that far exceeded their payed in FICA taxes.

    It's true that boomers will collectively collect more in benefits over their lifetimes but no individual boomer will ever collect as much as either of his "greatest generation" parents did.

  • Registration At Last!||

    "The most obvious, effective, and just approach is to end Social Security and Medicare and replace them with a true safety net that would help poor Americans regardless of age."

    ************************

    Who are you people, and what did you do with the Glibertarian editorial staff of Reason magazine?

  • some guy||

    Sometimes you have to be practical. When something is as broken as Medicare you can't expect to fix it in a generation. The safety net is step one.

  • ||

    The trouble is that the time to "to end Social Security and Medicare and replace them with a true safety net that would help poor Americans regardless of age" was about twenty-five or thirty years ago when the first sign of the unsustainability of the system started showing.

    But anything along those lines was instantly seized upon by the AARP as an attempt to throw poor old Aunt Maude out into a snowbank.

  • ||

    I should have added that any such scheme would need to be phased over a number of years that would allow people to adjust to the new rules.

    If the boomers can be faulted for anything it is that they never questioned their "greatest generation" parents' socialistic views until much too late.

  • Mr. FIFY||

    Daily Kos is but a click away, RAL.

  • Dovahkiin||

    I am 24y/o. How fucked am I and my wife?

    (My guess: almost hilariously so)

  • Loki||

    I recommend you start stock-piling KY jelly now.

  • Anomalous||

    100% screwed, blued, and tattooed.

  • some guy||

    You'll be fine as long as you can find a decent job and live your life as if you'll get nothing back from the government in your old age. True, you might spend your whole life renting and you probably will never be able to afford kids, a nice car or vacations. But hey, you'll be alive, right? That's something, at least.

  • mikesswimn||

    Based on your comment, I'd say you need to seriously readjust your concept of "doing well". For instance, let's define "doing well" as:

    1) Not actively getting shot at.
    2) Regularly eating 2 meals/day.
    3) Gasoline costs $1.18/hour, gross.

    That's how I view the world and you know what? Things are going great!

  • mikesswimn||

    Ugh, doesnt' recognize "less than", Edit:
    3) Gasoline costs less than $10/gallon
    4) Working and earning more than $1.18/hour gross

  • DarrenM||

    You also might consider moving to another country that's not so screwed up.

  • Tonio||

    Nice article, Nick and Veronique. Also, props on the Terry Colon illustration; takes me back to the Suck days.

    If experience is any guide the boomers can be trusted to do what's best for them, and damn the impact on others.

  • Harvard||

    [Also, props on the Terry Colon illustration; takes me back to the Suck days.]

    Yeah, a scant 3 days from movie theatre carnage and you headline an article with a 1911 ACP. Loved the touch.

  • goneGalt||

    If experience is any guide the boomers people can be trusted to do what's best for them, and damn the impact on others.

  • Loki||

    My college econ proffesor's description of old age entitlements:

    Imagine a few years from now after you've graduated and gotten a good paying job. You're sitting in your house when someone knocks on your door. You open it and there's an old man standing on your porch and he's screaming at you "Give some money, you sorry little ingrate! I fought and nearly died in WW2/ Korea/ Vietnam so that you could have the freedom to pay for my retirement! And don't you dare hold out on me! Oh, and here; pay these doctor's bills for me too! Now I'm off to my nice big house in a gated age restricted community in my nice big Cadillac. See you next month, peckerwood!".

    That's Social Sec. and Medicare in a nutshell. My prediction: Grey Dawn.

  • Loki||

    That cartton reminded of that little tirade he used to go on about Soc Sec/ Medicare.

  • Tonio||

    Except the boomers didn't fight WW2 or Korea. The generation which fought WW2 and Korea were the parents of the boomers.

  • Loki||

    This was in ~1999 or 2000 (I forget which year I took econ), before the boomers started retiring. Since the boomers didn't really fight any major wars (does Grenada count?), they can't even claim the "war vet/ nearly died for you/ defeated evil" argument.

  • some guy||

    They defeated the evils of poverty and drug abuse, right? Right?

  • ||

    Boomers fought in Vietnam post 1965 or so.

    But until 1967 or 8 most of the troops were depression era or wartime babies.

  • Rasilio||

    Actually given that the bulk of the soldiers in Vietnam were 18 - 20 year old draftees the boomers would have started appearing in theatre as soon as 1963 and been the bulk of the army by 1966. Given that US involvement in the war didn't end until 72 and that the bulk of the real fighting occurred between 66 and 71 it is fair to say that the Boomers did fight the Vietnam War.

    This article also unfairly pins quite a bit of the sins of the so called Greatest Generation on the Boomers. The fact is that the Generation which lived through the Depression and the War Years is given way too much of a pass on economic issues because they really are the ones who made a mess of things. The only real culpability the Boomers have is that they didn't do anything to fix the problem once they got into power, rather they stuck their heads into the sand, pretended the problems didn't exist and doubled down on the failed policies that created them.

    Now comes the question as Gen X enters our 40's and we start getting a little political power, most of us seem to recognize that the entitlement state isn't working, do we have the vision and courage to actually fix anything though, because if we don't, there probably be enough of a country left for Gen Y to really have a chance of fixing things.

  • ||

    Good comment, however:

    Draftees vs. volunteers: 25% (648,500) of total forces in country were draftees. (66% of U.S. armed forces members were drafted during WWII)
    Draftees accounted for 30.4% (17,725) of combat deaths in Vietnam.


    OTOH, you do seem to be correct about the number of boomers involved:

    The average age of the G.I. in 'Nam was 19...


    I thought it was higher, I though it was closer to 25 or so (WWII was 26). That number does seem to indicate that boomers were most involved in the fighting since the major combat activity was from 1965 to 1971 or 2. Before 1965 our only troops were "advisors".

  • Rasilio||

    Yeah I am familiar with that statistic, however I suspect a good number of the volunteers were like my father, they volunteered because they figured they would be drafted anyway and by volunteering they had at least some choice in what kind of job and which service they were assigned to (my father joined the Army with a prefered slot of aircraft mechanic after his 2 older brothers were drafted into the Marines)

  • cherokeejack||

    generational warefare over public assets is nothing new. Politicians, based on their recent lack of help with the economic mess we're in, will permit social security and medicare to utterly fail before they will "Do Anything" to properly fix the system. This is the nature of representative government and the reason it ultimately will fail. These process take hundreds of years but they are inevitable.

  • Dr. Thaddeus Tingleberry||

    "Yet the trust funds are not purely an accounting fiction, as is widely claimed; they are actual assets that the government has borrowed against and, as such, represent liabilities."

    Huh??

    This conclusion is disproved by the sentences preceding it, is intenally inconsistent, begs the logical question, and is prima facie untrue.

    Consider Joe Taxpayer. When Joes goes to the Social Insecurity Lock Box, he finds a note reading "IOU in the amount of $X, signed, Joe Taxpayer". By the logic of the quoted sentence above, Joe now has a valuable asset, which he can use as the basis of a new loan. If your grasp of economics leads you to claim that an IOU Peter writes to Paul can be the basis of additional borrowing by Peter... it's time to examine your premises.

    I'm going over to Lew Rockwell.com for a while.

  • Dr. Thaddeus Tingleberry||

    p.s. Is it policy at Reason never to cover the absurd obsequeience of the US Congress to Israel {i.e. Likud} and its allies over here?

    How about the *fact* that, though Jews are about 2.5% of the population, they Four out of six Federal Reserve Board governors and seven out of 12 Fed District Bank presidents are Jewish.

    http://original.antiwar.com/gi.....f-enemies/

    Is the answer that it's 'antisemitic' to note this and simply ask wherefrom such disproportionality obtains?

    When one looks at who chairs, say, the SEC and the FDIC and commodities trading, and who chairs the council of economic advisors to the prez, and you find it's similarly Jewish... what's the 'enlightened' answer there - Jewish control of banking is an 'antisemitic canard'?

    How about the lies getting us involved in Syria and Iran, two countries which don't threaten us at all, and the absurd pro-Israel resolutions and legislation passed unanimously in our Congress, even as we cast veto after veto at the UN to protect Israel from what are objectively, unequivocably war crimes?

    Israel's always right, and anyone who says any different is an anti-semite, is that it?

  • Dr. Thaddeus Tingleberry||

    The point isn't that racism its cool - but that hiding from the truth as to the disproportional power of an ethnoreligious group which often have loyalty to a foreign country first isn't wise, or kind, or honest, or fair.

    And ignoring it is going to lead us into a series of neocon planned wars.

    And yes, Virginia - the neocons are disproportionately right wing Jews with ties to Israel.

    http://www.motherjones.com/pol.....ie-factory

    Time to speak honestly about this or simply give up on avoiding elective, blowback-inducing interventionist wars for Israel's benefit.

    As to the economy - when a group making up 3% of the population seems to be more or less running the economy and banks and we're in a huge recession and about to go to war, again... fair-minded, honest, peace and justice types [even the non-statists] need to acknowledge that the US has a "Jewish Question" because of the over-influence of that minority group in finance, media and foreign policy, and their loyalty to a foreign power.*

    *More Jewish Americans volunteer for the IDF than the American military. KINDLY spare me the 'it's just a canard' routine... it's simply not a mere 'canard.'

  • Rasilio||

    Actually no, when Joe goes to the social security lock box he finds a not there saying ""IOU in the amount of $X, John the Tapayer signed, Joe Taxpayer legal guardian of John ".

    See Joe is not promising to pay himself, he is promising that his kids will pay him and at the moment under current law Joe's son John is legally obligated to make that payment. Sure that law can change at any time but given that the elderly have traditionally had FAR more political power than younger generations it is unlikely that the law will be changed and our kids will be far poorer than we were as a result.

  • D.A. Ridgely||

    People are crazy and times are strange
    I’m locked in tight, I’m out of range
    I used to care, but things have changed

  • Robert||

    I loved the ironic way it was used as the accompaniment to the only really good part (subcontracted) of the Watchmen movie. I enjoy all ironic uses of music like that.

  • Imanalterego||

    I sure could have used the extra dough when I first started working and paying for everything on my own in 1976, but I looked down at my pay stub and saw that FICA took a nice chunk (as did Uncle Sam.) I asked my dad, "What the hell is this?" He told me that that was my insurance for retirement. "You're supporting your grandmas." I thought it was a ripoff then, but now that I'm 55, it seems like a deal to me! OK, government, end this thing, but first, give me back MY money, that I've pumped into this scam for 35 years.

  • MicahStone||

    "They should be replaced with social welfare programs that cover all citizens, regardless of age, but only those who are too poor or incapacitated to take care of themselves."

    ....Life in the fantasy world of socialist (choom-induced) benevolence is really heart warming !!!!

    Get real Gillespie de Rugy: the current out-of-control SS disability taxpayer rip-off and the even more out-of-control OBOZO food stamp taxpayer money give-away PROVE that government run (especially, leftist governments) simply REWARD slugs, slackers, deadbeats, liars, freeloaders, losers, taxpayer-leeches, cheaters, ILLEGALS and potheads who do nothing but suck on the teat of the BIG GOVERNMENT NANNY-STATE and don't seriously address (because they can't) the actually issue of "helping the poor" and making certain that only the truly needy get benefits.

  • MicahStone||

    Here's the OBOZO big government nanny-state at work (wasting our tax money, of course)...A MUST READ for all the delusional loonies like Nick Gillespie Veronique de Rugy...

    "2,362 Millionaires Got Unemployment Benefits"
    By Matt Cover, cnsnews.com
    August 13, 2012

  • TruthInAction||

    So, end Social Security and Medicare, who/what pays me BACK my principle (contributions) of $385,000.00, plus, my interest (4%?) on a lifetime of payments?

    I am a fairly recent 64 yr old addition to the Social Security rolls. I'd happily exchange Medicare and Social Security programs to get it. Can you get if for me?

    Many in my generation actually paid its own way. I need the money, but would exchange part of it to put all the bureaucrats and politicians in jail and end all their ill-gotten benefits. Indeed, they ought to lose, too, as that is the problem with our political system, they make a mistake and we pay...not them!

  • ladyruth54||

    So all the people who actually saved their money should be denied due to means testing and the people who spent every penny they earned throughout their life will be the ones deemed qualified? I agree something needs to be done to change the whole stinkin' system but your suggestion is ripe for abuse and also punishes those who lived frugally.

  • tipuasher||

    Glad to see User Experience given priority over programming convenience. This is clearly the right direction
    http://azcrusher.com

  • MoreFreedom||

    While this article looks at costs of Medicare, it doesn't examine how successful Medicare is in reducing health costs for seniors. And examination of that question shows Medicare is a huge failure.

    David Goldhill, CEO of the Game Show Network, author of "How American Health Care Killed My Father" and life long Democrat, writes: "So even with the government paying almost all of their bills, today's seniors pay a higher share of their income for health care than seniors did before Medicare." http://www.huffingtonpost.com/.....02229.html

    Thus, after paying for Medicare all their lives, seniors today spend a higher share of their income on medical care than they did before Medicare existed. This suggests that just abolishing Medicare would lower health care costs for seniors. It proves that whenever government meddles in a market, it distorts the market and increases prices.

    As PJ O'Rouke, the wise one, said "If you think things are expensive now, just wait until government makes it free."

    I appreciate the author's explanation of the costs and redistribution from one generation to another. But the value of these government programs is a better question to ask than whether redistribution among generations is affordable, wise or moral (the answers being it's not affordable, it's not wise, it's immoral, and it's popular with politicians and seniors).

  • plusafdotcom||

    It bugs the shit out of me that Nick and Veronique can put so many words to "paper" and miss the obvious things I've seen for years...

    The SocSec system was flawed from the get-go. Life expectancy changes were NEVER factored into the system's math; baby booms and demographic bulges never were accounted for, and NOBODY could opt OUT of the system once they were in.

    And now the birds have come home to roost and damned near everyone is bitching about systems going bankrupt and how change is impossible and how we need to FIX IT NOW!

    Bullshit.

    This is a situation which has developed and evolved over decades, so to try to fix it in five or ten years (or "before it implodes) is sheer insanity.

    Reasonable "cures" should include phasing out the bad parts, but doing so over an AVERAGE WORKING CAREER, or about forty years!

    If new entrants to the workforce were given a choice of SocSec or personal, private "retirement accounts," (think IRA/Roth) and could contribute whatever they wanted PLUS avail themselves of contributions their employers would VOLUNTARILY offer them, they could opt out of the system and be NO burden on anyone but themselves by their retirement age, IF THEY even decided to EVER retire!

  • plusafdotcom||

    Continued....

    People already IN THE SocSec system could continue to participate OR opt out, but a Safety Net proportional to the number of years they've been earning income could enable them to seek higher returns (and nest eggs) by putting PART of their earnings and benefits into a personal/private account, while retaining PARTIAL benefits of SocSec as it exists today.

    These approaches would reduce future SocSec obligations as more and more workers opted out. And if anyone wanted to work their whole lives with the SocSec as their ONLY nest egg or safety net, REAL actuarial numbers and serious math could show them what to really expect when they pulled the plug and "retired."

    The bullshit about "retirees have lower living expenses" is only believed by people who haven't retired.

    After retirement, virtually NONE of your daily, monthly or annual expenses drop AT ALL, unless you're spending a LOT of money on commuting or on suits or clothing for your job. Your mortgage might be paid off, but all insurances, car expenses, taxes, utility bills, etc., continue about the same as the day before you punched out of work.

  • plusafdotcom||

    and finally...

    Expect to earn 5% on your savings? You'd better have twenty or forty times YOUR LAST GROSS YEARLY INCOME in the bank when you retire, because real living expenses will NOT drop 20-30% when you leave work, and if your savings include equities or bonds, add some cushion for the inevitable 20-30% dive the markets will take some time during your retirement years.

    But please don't trust any government agency or pension plan to take care of you forever. Too many variables change during a working lifetime.

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