I found an interesting old thread about this topic; current presidential candidates have been rather quiet about it since then and now: very few new ideas or initiatives, the Titanic of social security, medicare and entitlement schemes apparently continues to sail inexorably toward an iceberg of debt many trillions in size!
This appears to be a major crisis in the making, not limited to the US, of course. A growing elderly population coupled with a declining tax base make for some very scary numbers...
Is the alarm justified?
"The unfunded liabilities of Medicare begin maturing in 2008. The baby boom generation starts reaching the minimum Social Security retirement age in late 2008. The unfunded liabilities of Social Security begin maturing in 2012. And the boomers reach Medicare eligibility in 2011. The unfunded liabilities of Medicare and Social Security are estimated to be roughly 12 trillion dollars. The current debt exceeds 6 trillion and will exceed 8 trillion by 2012. Current GDP is roughly 10 trillion and the federal budget is roughly 2 trillion.
Assuming 3% annual growth in GDP (extremely optimistic in my opinion), in 2012 we are looking at a $13.5 trillion economy. At 5%,interest payments for the United States government will equal half of all current federal revenues and federal deficits will be ballooning. I will ask the doubters four questions:
Who will finance this profligate debtor? And at what rate?
Who will this debtor tax to make payments on these debts? And at what rate will they be taxed?
All democracies throughout history have ended in bankruptcy. When voters discover they can vote themselves payments from the public treasury, Pandora's box has been opened. The XVIth and XVIIth Amendments (both ratified in 1913) brought the US much closer to a
democracy than to the republic given to us by the Founders. Prior to the establishment of the Federal Reserve in 1913, federal tax revenues never exceeded 6% of GDP as opposed to our current 20%. The 1912 dollar bought 99 cents worth of 1789 goods and services.
In the US today, two out of every three dollars spent by the federal government are payments to individuals or groups for which no products are delivered or no services rendered. The 2002 dollar buys 5 cents worth of 1913 goods and services. The US began life
with debts from the Revolutionary War of $75 million (that's right million with an M), but had reduced that to a mere 38 thousand dollars by 1836.
The debt ballooned to a staggering 3 billion (that's billion with a B) after the implementation of the Federal Reserve and WWI. By 1965 it was a mere 325 billion when LBJ began cranking up the War on Poverty reaching the first trillion by 1981 and the second trillion by 1986. And we are still adding roughly a trillion every five years.
If we do not turn the United States around a full 180 degrees within the next three election cycles, there will be no Presidential election in 2016. It is not politically possible to
tax Americans sufficiently to pay the unfunded liabilities of Medicare and Social Security while financing our existing deficits. There are only two ways these unfunded liabilities can be met:
Substantial additional borrowing; and running the printing presses to create more dollars out of thin air
When the "full faith and credit of the United States" is a meaningless term and no one will accept dollar bills in exchange for goods and services, like all other democracies throughout
history, the United States will be bankrupt. That day is going to arrive before 2016.
Government taxes exceed the cost of housing, food, clothing and transportation for almost half of all American families. The NASDAQ bubble has burst. The DOW and S&P bubbles are rapidly deflating. The dollar and bond bubbles are precarious. The credit bubble is
still inflating thanks to Americans who are taxed to the point of having to borrow to meet daily living expenses."
America's Coming Bankruptcy - misc.invest.stocks | Google Groups
Ha! And this was written in 2002, before the final bill for the Iraq War comes in, not to mention the housing bus, and heavy borrowing...