Published On: Sun, Jul 23rd, 2017

America’s financial crisis: Health care and Social Security

With the national debt in the United States barreling towards $20 trillion and the US Federal Budget deficit around $670 billion, the country is without a doubt in dire straits and drastic measures have to be taken to even attempt to get this under control.


Two recent articles outline some of the issues with the two largest budget items: Health care (Medicare/Medicaid) and Social Security.

First, senior fellow at the Manhattan Institute Brian Riedl wrote the following concerning health care. Here is a portion of the piece:

After doubling to $20 trillion since 2009, the national debt is now projected to soar to an unfathomable $92 trillion over the next 30 years. At that point, depending on interest rates, between 60 and 100 percent of all individual income taxes will go towards paying the interest on this debt.

What is driving the federal budget into bankruptcy? Health care spending.

The problem is not tax revenues (they will continue growing above historical averages), nor other spending programs (Social Security is the only other major category growing as a share of the GDP).

Rather, health care is devouring the budget.

Remember this as Congress debates Obamacare and Medicaid reform. Critics denounce Republican attempts to “slash health care spending.” In reality, their proposals would slow the growth of health care spending relative to the current baseline projections – projections that are completely unsustainable anyway.

After staying between two and three percent of the economy in the 1980s and 1990s, federal health spending has jumped to 5.5 percent of GDP today, on its way to a projected 9.3 percent thirty years from now – and even that assumes a long-term slowdown in the growth of per-capita health care costs.

For context, the entire federal budget has remained around 20 percent of GDP for the past 50 years. Each percentage point of the GDP translates into $190 billion, or $1,500 per household. So that overall growth from 3 to 9.3 percent of GDP would eventually require a permanent tax increase of $9,450 per household – a figure that would rise with incomes each year.

Federal Medicaid spending has leaped from $201 billion to $389 billion since 2008, and is headed towards $650 billion a decade from now.

Finally, lawmakers should not forget a Medicare system that currently collects $140,000 in lifetime taxes from the typical retiring couple and then provides them with $422,000 in benefits (all adjusted into net present values). Multiply this by 77 million retiring baby boomers, and Medicare’s long-term shortfall is measured in the tens of trillions of dollars.

Pretty scary stuff…right?

It continues with Social Security as outlined in a report on SHTFplan.com by Mac Slavo:

When social security was first implemented in the 1930’s, America was a very different country. Especially in regards to demographics. The average life expectancy was roughly 18 years younger than it is now, and birth rates were a bit higher than they are now. By the 1950’s, the fertility rate was twice as high as it is in the 21st century.

In other words, for the first few decades, social security seemed very sustainable.

According to the Social Security Board of Trustees, the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds will be depleted in 2034.

When this happens, only 77 percent of benefits will be payable. That estimate is no change from last year’s estimate.

In addition, the Disability Insurance trust fund will be depleted in 2028, which is an improvement from last year’s estimate of 2023. Once that fund is depleted, 93 percent of benefits will be paid.

Right now, Social Security continues to take in through revenue more than it pays it through benefits, which is expected to continue until 2022. Once Social Security begins to pay out more than it takes in, it will be forced to liquidate the assets held by the trust funds.

In 2016, Social Security generated $957 billion in income. It only paid out $922 billion including $911 billion in benefits to 61 million beneficiaries.

There isn’t really any viable solution for paying off the future liabilities of social security, aside from cutting the benefits or increasing the retirement age. Otherwise it’s going to run out of money eventually, which is the same story with private and public pensions. We are all paying for our retirements in one form or another, but few of us living right now are going to fully benefit from it.

Is it long past time that this was taken seriously? Unfortunately, few take this upcoming catastrophe with any seriousness.


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  1. Trump signs executive order expanding access to more healthcare choices and affordable options | The Global Dispatch says:

    […] America’s financial crisis: Health care and Social Security […]

  2. Health care options: Direct Care - Outbreak News Today says:

    […] America’s financial crisis: Health care and Social Security […]

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