One way to explain certain economic realities is to imagine a hypothetical society without money. Suppose we could forget, for a moment, the costs of transacting without money; all exchanges, whether on spot or deferred, would be paid directly in goods and services. In effect, this is a barter economy. In such a society, the scarcity of things with economic value would be more evident; it would be more difficult, for instance, for people to get confused about the consequences that follow (eventually) from government officials promising to give voters more than can realistically be raised in taxes, now or in the future. If in a beach town with a mile of waterfront, the mayor promises to give each of the thousand families living there three yards of waterfront to build a tent on for the summer, it is clear that some promises are going to be broken.
Entitlements, in particular the promises to pay pensions and health services by the government, are the most important driver of fiscal deficits and the accumulation of public debts, as shown in a recent study by Dominik Lett. He explains that “by 2036, social security, Medicare, Medicaid, and interest costs will account for 73% of total federal spending, consuming nearly 100 percent of all of federal revenue.”
Those debts, in a monetary society, do not change the nature of the disequilibrium by which they are generated: the state collects fewer resources than are necessary to pay for all actual goods and services that the government transfers to the beneficiaries of the entitlements.
Working taxpayers are encouraged to think of themselves as “lending” money to the government to finance future benefits, but instead of the government investing those payments to generate the needed resources, those “loans” are simply consumed by today’s retirees. This creates the monetary disequilibrium we experience today.
...read more at lawliberty.org
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This is not a new pitch or argument, but I'm sick and tired of folks dumping the current economic problem on pensions and social security. The fact is, we all paid in generations before (being required to) under the premise that there would be those benefits given back in our older age. 30-40 years later, now the latest round of critics wants to argue, "Oh, it's too expensive for us younger folks, now we need to stop funding that commitment and screw the older folks who can't work or won't be hired due to agism so that we're off the financial hook."
The truth is, more of the funding would have been available had the government done two things: 1) stop stealing the benefit money paid in to fund other stuff, and 2) plan better that with medicine and technology advancement more people were going to be born and more people were going to live longer. At the time these models were created, the majority of people were dead by 60, due to less wonderful health standards, medicine and living conditions. There was also less population. Both contributed to less cost on the benefit pool. Now, with exploding populations from the 1970s forward, and more older people who got stubborn and lived longer thanks to medicine, you now have a situation where the cost output exceeds the funding input. Again, add in the stealing and the problem is, not surprisingly, insolvency and cut backs as quick fixes.
What should be done is reduce the cost of medicine which is the third driver eating up everything and everyone's retirement, driving them to benefits. Focus on a greater value of what the benefits should pay for in terms of, not cut backs, but better value delivery for what is paid. In other words, Social Security shouldn't be available to help pay for a new RV. It should cover food, utilities, health and lodging. And finally, stop stealing from the pool for other government programs.
Of course, none of that will happen. Stealing will continue, benefits will be cut, and payroll requirements will increase as a hidden tax. Because no matter what, we can't think ourselves collectively out of a shit hole today.