McClaughry: Unsustainability crisis facing seniors

By John McClaughry

For a moment let’s set aside a long list of national problems — crime, drugs, racism, election laws, epidemics, vaccinations, climate, and a perilous international situation — to focus on a truly critical issue lurking beyond the purview of the nightly news.

To set the stage for this: the Federal government’s current debt owed to the public — before the net contributions to that debt from a pending trillion dollar infrastructure bill and as much as a $3.5 trillion dollar pending entitlement spending bill are added to the nation’s accounting — is $28.43 trillion. That is 102% of the nation’s total Gross Domestic Product, a level never approached since the final year of World War II. A nation with that level of debt is usually associated with fiscal failures such as Argentina and Greece.

John McClaughry

John McClaughry is vice president of the Ethan Allen Institute.

The Treasury pays almost $1 billion a day in interest on this debt – at a time when the Federal government is borrowing (10 year note yield) at 1.33%. A year from now that rate is much more likely to be higher, not lower. The interest component of the Federal budget will accordingly rise, and it must be paid to preserve the nation’s credit.

Now let’s focus on two programs extremely important to 65 million senior Americans and their survivors and dependents: Social Security and Medicare.

Last month the Trustees of the Social Security System, including Medicare, released their annual report on the condition of those programs. The Trustees are four Cabinet Officers appointed by President Biden. Here’s what they tell us.

The two Social Security funds combined (retirement and disability) will be exhausted in 2034. That is, all reserves will have been paid out, and the funds will only be able to pay whatever comes in from payroll taxes. At the current payroll tax rate, that will be 78% of benefits promised for that year.

The Medicare program is threatened by longer life expectancy and ever increasing senior health care costs. At the present tax rate (1.45% of wage and salary incomes, plus a 0.9% Obamacare surcharge on very high income seniors), the Health Insurance Trust Fund (HI) will be able to pay only 91% of expected claims in 2026, shrinking in every succeeding year.

Every proposed remedial step is intensely controversial. For the retirement funds, freeze cost of living increases. Raise social security payroll tax contributions to 10% for employees and employers, and 20% for the self-employed. Pour in general revenues – actually borrowed money – to cover annual shortfalls. Eliminate early retirement at 62 and increase the retirement age to 70. Tell seniors they’ll have to live on less.

The solutions for Medicare are even more controversial. Raise the payroll tax rate from 1.45% to 5%. Give seniors a cash incentive not to use expensive medical care here and look for treatment in low-cost countries (“medical tourism”). Ration care UK-style, by reducing services to the very elderly or unhealthy, and stretching out waiting times until some patients die. Reduce reimbursements to providers, at the risk of having fewer providers willing to accept discount-priced Medicare patients, giving them cheaper services, and reducing the number of small clinics and hospitals especially in underserved minority and rural areas.

Not only are politicians of both parties allergic to any discussion of this problem, but a large number of them – the Sanders-Biden Democrats – are hard at work to make the Medicare problem rapidly worse.

Their current plan, in Sanders’ pending $3.5 trillion budget bill, would expand benefits to include dental, vision and hearing, and lower the Medicare eligibility age to 60. If put in effect this year, it would bring the Medicare reduced benefit day two years closer, from 2026 to 2024.

The Sanders bill would also create new Federally-funded entitlements, like free college tuition, national child care, and universal pre-kindergarten , the spending for which would compete for many billions of budget dollars with every other Federal spending program.

Covering fund shortfalls by “general revenues” is no longer, if it ever was, any kind of viable solution. “General revenues” means more borrowed money and/or more tax dollars. The burden of new taxes to avert the exhaustion of the two funds would threaten to cripple the U.S. economy, already facing COVID challenges, increasing dollar depreciation, and fierce international competition,.

What’s my solution? This is an unprecedented, titanic problem, and the only hard advice I can give is: don’t make it worse. Restoring sustainability to faltering Social Security and Medicare will require extraordinarily courageous leadership not presently on the horizon.

Perhaps the roar from seniors getting reduced retirement benefits and restricted health care services will put those funds on the road back to fiscal sustainability. I hope I live to see it.

John McClaughry is vice president of the Ethan Allen Institute.

Images courtesy of Wikimedia Commons/Andreas Bohnenstengel and John McClaughry
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10 thoughts on “McClaughry: Unsustainability crisis facing seniors

  1. We are fortunate here at TN. We have thinkers and researchers who are concerned about our state and our country. We are the people who shut down the comment forums at other sites like vtgravedigger where truth goes to die! Why did that happen? It happened because liberals act on feelings and can’t handle the truth. The truth is that they have sold the store (America’s wealth) to buy power for themselves and to suck the government teat, lie, cheat and steal to pay voters off so they could stay in control. They never give a hand up as long as they can give a handout.

    The country has arrived at the place where the can can’t be licked down the road ant more. People who voted for this mess in Washington have actually aided in the destruction of the progressive movement by exposing who they are. Our governor voted for Joe Biden and still supports his destruction of America. Does that tell you just how incompetent he is to vote for the demise of America?

    In my random conversations with people, I can not believe how uninformed they are abut almost everything. Uninformed is a nice way of saying ignorant. While life deteriorates around us in Vermont, people vote for the same idiots destroying everything. They are either idiots, brain dead or just can’t believe they are wrong because they support each others ignorance. Okay, I don’t know everything and I don’t have all the answers but there is some serious bad shat going on that needs to be corrected nationally and locally. I am disgusted! how much mire do we need to see before you are disgusted?

  2. An interesting fact: The elderly are by far the wealthiest class of people in this country – by far. Yet we have this poor class of elderly that are scrapping to get by. Seems wrong… But then again, if you gave everyone $100K right now, in 70 years some would have some with billions and some would have nothing.
    And we have a younger class with little economic opportunity compared to their grandparents. Add in hundreds of thousands of illegal aliens living off social services and wala, you get the mess of America that we have now. Democrat answer – print our way to prosperity! SMH

  3. Of course the real problem was trying to have government do what families are to do. When has it been wise to be dependent on government?

    As for John’s last sentence, “I hope I live to see it.” I would not bet on it. While putting attention on the problems in this life is right and wise, it does amaze me how for most people it seems a far greater concern than what happens after this life. Yet this life is short and the next one is forever … and everyone lives as though life has purpose far greater than this life … I suspect that is because we innately know we are eternal. I would be willing to bet that the more we are united with our creator via his gift of eternal life, and embrace His instructions, the problems here will start to be taken care of. His design was family care, not government care!

    The tail is trying to wag the dog. It never works.

  4. This is intentional – baby boomers and seniors are targeted as useless eaters and as the largest populations demographic behind the Gen Xers, a threat to ‘sustainability’ per the IPCC report back in…2014? That the UN Sustainable Development Agenda 2021/30 is predicated on – humans are the problems (not the corporations…naaah…not them).
    This is a population agenda.
    And at the bottom of this prejudicial, biased, demonization of us useless eaters are the single older women (widowed, never married, no kids) who NO programs are directed at helping. As baby boomers, our generation was the first to have women work out of the home, consider being the single earners, and have no children – not contributing to the population problem.
    Like so many other ‘traps’ set for the unsuspecting, this created a third class citizen that is conveniently discarded when discussions like this come up.
    I AM living on between $600-700 month. I’m facing eviction from the STATE because I choose not to live beyond my means. I choose to live frugally and WITH nature. And I choose to make my own choices. ALL of those are unpopular ways of living that Vermont was BUILT upon, now demonized and legislated against…as if I am the problem.
    MOST seniors have to live in preplanned housing that is saturated with electrosmog that undermines brain activity and bodily immune systems, among other things. And yet our hospitals and our care homes and our senior centers are awash with this invisible poison you all love to ignore.
    I have no choice but to leave the state.
    I have no place to go – literally a refugee.
    How did this happen?
    But no one cares, because I’m a useless eater, my individual voice needs to be silenced, and I’m taking up too much space.
    How the hell did that happen?
    My values are what built Vermont.

    • Allison, your posting breaks my heart. Please give me a call. Maybe I can help in some way. 802-760-7789. Jackie

  5. Simply put, SS and Medicare was never put in a “locked box” because Demorats
    wanted to be able to buy votes when needed with it.. and Rino’s are too spinless to do anything about it..

  6. Its not that hard to fix, but the liberals/commies do not want to fix it. Until they are removed from office, there is no hope.

  7. Gird your loins everyone. As long as the debt ‘can’ continues to be ‘kicked down the road’, no problem. ‘The problem’ occurs when the owners of all of this debt call in their markers – not because they want to call in those markers, but because they must call them in to cover their other investment obligations. The ‘owners’ of this debt are the folks who bought the T-bills, the municipal bonds, and various other debt derivatives being traded, to cover this massive national borrowing scheme. Read ‘The Big Short’ (the story of the 2008 debt crisis).

    Here’s the deal, in a nutshell. The average citizen is not at risk. They don’t own the debt. But Wall Street does. And they are on the verge of losing their collective shirts. The richest people in the world are about to join the ranks of the ‘average Joe’ (no pun intended). Bezos, Zuckerberg, Gates, Buffett, Soros, and countless other billionaires are about to lose a lot of money. Their individual net worth is about to go into the tank.

    How will this chaos unfold? It’s anyone’s guess. But here’s a bit of advice from one of history’s greatest thinkers who understood human nature and free markets better than anyone…. Adam Smith.

    “Examine the records of history, recollect what has happened within the circle of your own experience, consider with attention what has been the conduct of almost all the greatly unfortunate, either in private or public life, whom you may have either read of, or hear of, or remember, and you will find that the misfortunes of by far the greater part of them have arisen from their not knowing when they were well, when it was proper for them to set still and to be contented.”

    Get your house in order. Set still. The last man standing will win the day.

  8. This is an extremely important issue. Older Americans have worked all of their lives, paid into the system and expected to be able to depend on it for retirement income. While some retirees are more affluent and have substantial resources, many are not. Benefits for those who weren’t high earners are low anyway; some only receiving $600-$700/month to live on. Can you imagine taking 20% away from that?

    And most retirees have to sign up for Medicare when they reach 65: most can’t afford to pay anymore than they already pay.

    While this issue is mostly not even on the radar of young Americans, and they are more interested in the free college and other promises that Bernie holds out to them, unless we want to see homeless elderly living on the streets, we need to get serious about fixing this.

  9. The Democrats and Progressives would rather cater to illegal immigrants and able-bodied non seniors who are used to depending on the almighty State for their living, thus ensuring that Democrats reap their votes, rather than to take care of American senior citizens. Seniors who worked all their lives, paid into the system, and expect the government to keep its promise to them. Liberal voters, you have done it to all of us and yourselves by installing these wastrels in office and keeping them there so you can nurse at Uncle Sam’s teats. The liberals keep adding more and more people to programs paid for the the government. Remember, what the government giveth the government can take away. We are seeing the supposed stone foundation supporting many of these programs become sinking sand. Want to live under Democratic Socialism? There is nothing democratic about it, as we are about to discover. But there is plenty of Socialist about it. FDR started this. He lied to us about the eventual outcome.

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