Pethokoukis

Is $100 trillion in future entitlements debt really no biggie?

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I think I can condense current left-of-center thinking about the national debt as follows:

1. It’s a long-term problem, not a today problem or a tomorrow problem or even a day after tomorrow problem.

2. And since it’s a long-term problem, don’t fret about it. Lots of stuff can change between now and then.

3.Oh, it might not even be much of a problem at all since the math is probably wrong.

I think that’s a fair summation. Yesterday, I wrote about an economic report that liberals now contend proves the Congressional Budget Office is overstating future Medicare liabilities. (Doubtful.) And now my friend Derek Thompson over at The Atlantic has a piece downplaying estimates that total long-term US entitlement liabilities are around $100 trillion over the next century. Derek makes several points: a) unfunded liabilities are just future promises that legislators can change; b) ginormous, long-term numbers seem scarier than they really are since the future economy will be so much bigger; and c) all these forecasts are subject to change:

The shortfall in Medicare and Social Security is exquisitely sensitive to just about every demographic trend you can imagine, including longevity, immigration, income growth, and birth rates. Furthermore, it assumes that seven decades of innovation will do nothing to change the rate of health care inflation, which is a brave assumption. We know next to nothing about how medical inflation will change after this decade. The fact that actuaries pretend to know the future doesn’t make them oracles. It just makes them dutiful actuaries.

I would counter as follows:

1. The longer we wait, legislative changes will need to be more dramatic and thus harder to pass.

2. Then there are the opportunity costs of what else we could be doing with our money rather than spending it inefficiently on social insurance programs desperate for modernization.

3. Another way of looking at these liabilities is as a share of GDP. When you do that and take into account possible economic impacts — and even when you don’t — you get appropriately scary budget charts like this one:

4. Right, lots can happen. You bet. Maybe technology will save us and make health care super affordable. Or perhaps Americans will want higher and higher levels of premium medicine and costs will rise even faster. But like our parents say, hope for the best, but plan for the worst. Or at least take your best shot at planning for a realistically bad scenario.

5. And if the debt is no biggie, why are liberals so eager to raise taxes during an anemic recovery? What’s the hurry?

6 thoughts on “Is $100 trillion in future entitlements debt really no biggie?

  1. Did Costco enter the laundry business?

    In today’s WSJ we learn that COSTCO actually borrowed $3.5 billion to pay a $7 “special dividend” to its shareholders. It paid 1.7% “and less.” Naturally, the insider founders own a ton of stock, Costco co-founder Jim Sinegal owns almost 1 million shares.

    The timing was targeted to avoid any “fiscal cliff” and all its associated tax hikes that could begin on January 1. So far, so good–I got it. But I have some observations and questions:

    1-Since when does a highly profitable and cash rich company like Costco ever borrow money from a bank in order to pay a “special” or “extra” dividend?

    2-How much of this 2013 tax-hike exempted money is going to find its way back into the Obama and the Democrat “stash?”

    3-How many of the lending institutions received taxpayer “bailout” money just a few years ago? How much?

    4- Is this for what the taxpayer bailout money was intended? Excuse me for asking, but that’s my money. And I still hear a lot of small businesses screaming that they can’t get bank loans. Not to mention at a rate of 1.7% or less.

    5-I’m only trying to connect the dots….could this, and many of the other fiscal cliff/tax-hike exempted “special” dividends, be one of the biggest money laundering schemes ever?

    6-As of Wednesday, 173 companies participated in a “special” dividend strategy–101 more than in 2011. How many other companies paying “specials” and their lenders (if that’s how they got the money) conspired in a comparable manner? More importantly, how many of the companies were big Obama/Democrat money bundlers, fund raisers and financial supporters?

    Why am I concerned, you ask? How does this grab you?

    Vice President Joe Biden is attending the opening of Washington, D.C.’s first Costco this morning. This from the media pool report:

    Motorcade arrived at dc’s first Costco at 9:24 am
    Today is the store’s grand opening
    From a WH official:
    The Vice President will be greeted at Costco by CEO Craig Jelinek and
    Co-founder Jim Sinegal, who were both at Costco’s grand opening
    ceremony this morning.

    Uneventful ride w commuters stopping for the motorcade passing down
    Connecticut Ave, along Rhode Island

    Sinegal was a big fundraiser for Barack Obama’s reelection campaign, and even hosted a campaign event for the president at his West Coast home.

    • Actually he hosted two big fundraisers at his home. Jim is a smart guy. He helped elect someone dedicated to raising taxes. He’s just not going to pay them himself. And, yes, some of that saving will be routed to the DNC.

  2. I think the public looks at it this way. Last week you opened your Mastercard statement and saw you owed $200,000. Now someone tells you that when you factor in all the future auto charges you’ve authorized it’s really more like $400,000. Since you have no intention of paying back either amount, why would you do anything different today?

  3. there’s a big problem with AEI “logic” on Social Security.

    There are no unfunded liabilities because by LAW, SS cannot pay out more than FICA brings in.

    the only way this could change is if Congress does something. Unfunded liabilities mean you have to pay out benefits and the law says it can’t.

    so that’s an oft-repeated lie … emanating from the likes of AEI and like-minded “think tanks” – an oxymoron.

    Second – if you want to talk unfunded liabilities why do you ignore the military pensions and health care ?

    if you are really concerned about entitlements why do you ignore the military entitlements?

    • Okay, so SS cannot by law pay out more than it takes in. So it has a limited pool of funds. It is also required–by law–to pay benefits to everyone who qualifies. So what do you do when you don’t have enough funds coming in to pay benefits to everyone who qualifies? Stiff some citizens? Cut everyone’s benefits? Print more bogus money?

      • re: ” So what do you do when you don’t have enough funds coming in to pay benefits to everyone who qualifies? Stiff some citizens? Cut everyone’s benefits? Print more bogus money?”

        by law – you must reduce benefits. right now they are saying that benefits will be about 75% of scheduled if no reforms are implemented.

        but the more germane point is AEI’s propaganda that Social Security has unfunded liabilities which is false.

        Medicare DOES have unfunded liabilities – HUGE, in fact.

        but then so does Military pension and health care which AEI never talks about.

        There are about 30 reform options for social security and a simple one is to reduce the cost-of-living escalator which is too rich.

        In terms of CURRENT deficits and debt, SS is a gnat on a dogs butt.

        it does have about 3 trillion of intergovernmental debt but, for instance, “cutting” SS would have no effect on the deficit … there are much bigger fish to fry to balance the budget than SS.

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