With all the news of the bailouts, the Fed printing money, and the current budget process, the news released by the Social Security Trustees must have been overshadowed. For the past few years, the trustees have made it known that the future, unfunded liabilities for Medicare and Social Security were $67,000,000,000,000. As an aside, I am writing out the full number whenever I refer to trillions so we can see exactly how huge this number is. The magnitude is lost when using the word trillion.
It turns out this economic climate is having an effect on Social Security and Medicare’s long term viability. The reduction in employment is reducing the amount of Social Security and Medicare taxes collected. This reduced collection means the surplus the government was projecting to run in Social Security and Medicare until 2020 could end by 2011 – almost a full decade. This has led the Social Security Trustees to project the current unfunded liabilities to be $101,000,000,000,000 – $34 Trillion more than previously anticipated.
This is in addition to the $11,000,000,000,000 current debt, the projected $9,300,000,000,000 deficit over the next five years (by the Congressional Budget Office) for the bailouts and budgets, and the amounts of future bailouts which will certainly happen over the coming years.
The current size of our entire economy as measured by the Gross Domestic Product (GDP) is $14,000,000,000,000. This means we will end up owing substantially more than our economy produces. What happens to a family that owes more than they make? Hmm – oh, that’s right. They go bankrupt. In fact, most individuals go bankrupt well before they reach the levels of debt we are going to face.
As someone who swims upstream to wealth, we need to work to keep our politicians in check and start to reduce this deficit spending. Or, you should start investing in assets that perform well when inflation rules.